§ Question again proposed.
§ Mr. Speaker
Before I call the right hon. Lady, may I make an appeal to the House for shorter speeches? Yesterday one back bencher spoke for 28 minutes and two others each spoke for over 20 minutes. This is unfair to other hon. Members.
§ 3.55 p.m.
§ The Secretary of State for Social Services (Mrs. Barbara Castle)
Seldom can anyone in my job have had a happier report to make to the House after a starting period of three weeks. I hope this afternoon that the right hon. and learned Member for Surrey, East (Sir G. Howe) will be a little more enthusiastic in his appreciation of it than he was yesterday. I gather that the right hon. Member for Carshalton (Mr. Carr) last night assured the country that if he had not introduced food subsidies he could have provided large pension increases. I thought that the word "could" was interesting. The right hon. Gentleman did not say "would". I do not think that it would have been a question of "would" if a Conservative Government had been returned, in view of the churlish 640 remarks about pensions and other uprating benefits made by the right hon. Gentleman the Leader of the Opposition in the debate on the Queen's Speech.
I do not make these remarks in any mood of complacency. I think that I know as well as anybody what serious gaps there still are, even after this uprating, in our social provision for the troubled, deserted, the chronically sick, the incapacitated and disabled, the lonely and the poor; but I refuse to underestimate the size of our achievement in our first three weeks—a shift of £1,250 million of resources to the underprivileged at a stroke.
We are all paying for this shift, and I hope that we are proud to pay for it. I hope that none of us will run away from the implications in terms of paying for it in supporting the increase that we have announced. Let me remind the House of what we shall be paying for. There will be an increase of 29 per cent. in long-term benefits—the highest ever in the history of the national insurance scheme—and an increase in short-term benefits of 17 per cent., twice the increase of the Conservative uprating last year. There will be some immediate relief to the disabled, pending the autumn review which I am pledged to make to the House. In addition to the large number of elderly disabled and old-age pensioners on supplementary benefits, there are 1½ million chronically sick and disabled people in receipt of Social Security benefits of one kind or another, who will receive about £160 million from the uprating. We have also included a welcome relaxation of the earnings rule, and, not least, we have announced our intention that any future rises in pensions will be linked to wage increases—an important change in our pensions policy that has been warmly welcomed by Age Concern. All this has been done within 10 months of the last uprating.
It is appropriate for me to remind the House that Section 39 of the 1973 Social Security Act, carried through in the last year of the Conservative Government, merely requires the Secretary of State to have regard to price increases since the last review. Ours is a pension increase of 29 per cent., and we knew in February of this year—the latest figure available—that prices had risen since last October by 5.2 per cent. Incidentally, 641 the 1973 Social Security Act laid down in Section 39 that the uprating of benefits by order could take effect only between 16th November and 30th November; that is, more than 12 months after the previous uprating. So it is a little odd now for the Opposition to claim that they were always in favour of six-monthly reviews. They introduced a very important piece of social security legislation last year and very carefully omitted to include six-monthly reviews.
In view of this achievement of ours, it is no wonder that Joe Rogaly said in the Financial Times:It must be acknowledged that there really has been a shift of resources in favour of the old.He might have added:and in favour of widows, invalidity pensioners and the chronically sick.The shift has been made quite deliberately by kindness aforethought in order to set Britain on a new course towards a just and fair society as part of our move towards a major redistribution of wealth and income, as my right hon. Friend the Chancellor of the Exchequer said on Tuesday in his remarkable Budget speech.
It has also been done with maximum speed. This year there will be a mere 17 weeks between the date of the announcement and the actual uprating, compared with a period last year of 29 weeks. I mention that because it is important to point out that it means three things. First, the speed of this uprating means an enormous burden on the staff of my Department, and I want publicly to recognise this. It so happens that when successive Governments introduce involved upratings the Government get the glory and my staff gets the work.
The 70,000 social security staff, on whom Parliament has imposed the duty of determining objectively whether an individual before them is eligible for benefits, are in the front line. They are doing a complex and difficult job, whether at the counter or at the desk, trying to carry out the wishes of Parliament. I want to be the first to recognise that the increases which we are proposing in the time span we are proposing are putting a very great burden on them.
I know that there are criticisms in the House very often about the staff of the DHSS. I want to make the administration of social services as sensitive, 642 humane, and flexible as possible. For that reason, I will always welcome constructive criticism from any part of the House. But it is wrong and unfair of us in Parliament to criticise local staff for the consequences of the policies of the Government. I intend to try to establish as close a relationship as possible with my staff, and I will not allow its members to be made the butt of criticisms which should be directed at me.
In advancing the date of the uprating to 22nd July—the earliest possible date—we have taken a calculated risk. It is that some pensioners may not get the increase in time and may, therefore, have to collect some arrears. I know that the members of the staff of my Department up and down the country will do their best to avoid this however much they may grumble at the amount of overtime involved. But if it happens, I hope that the House will realise why it has happened and that it is not the responsibility of DHSS staff but my own.
The second consequence of the speed with which we have carried through this uprating is that I have had to streamline our proposals for increases to a degree that I would not otherwise have wished to do. I have had to concentrate on the main elements in the uprating and to postpone a number of detailed improvements to another year. I refer, for instance, to the disregards point which was raised by the hon. Member for Hazel Grove (Dr. Winstanley) and the hon. Member for Somerset, North (Mr. Dean) in our earlier debates. I have had to do it because to try to deal with the problem of the disregards this time would have added another administrative complication. It would have meant that we could not have got the main uprating into operation by 22nd July. But I have all these matters very much in mind for future years.
The third consequence of the speed of our action is that we have had to bring forward an uprating Bill as quickly as possible. The National Insurance Bill to embody the uprating will be published at 11 o'clock tomorrow morning. That is an absolutely record speed. We produced the Bill in two days between the Budget announcement and publication, whereas last year the time taken was six weeks. That brings me to the work which my staff at head office has had to do to make that possible. It has been a really all-out 643 job. I am sure that we all want to congratulate the staff on it.
If we are to get this uprating into operation by 22nd July, it is necessary to get that Bill through the House with the utmost speed possible. I hope that the House will recognise this and be willing to co-operate.
Is this record uprating just a flash in the pan by a new Government, or shall we make it stick? We intend that it shall stick. That is why, for example, the Bill will alter the previous Government's statutory obligation on the Secretary of State to have regard to movements in prices in the annual upratings. We shall embody in the Bill in its place the statutory obligation to have regard to movements in earnings where these would be be more advantageous to the beneficiary. As we get on top of inflation the value of that to the pensioner and to the other beneficiaries will become increasingly clear.
Looking at the figures over the years, we find that pensions merely in line with prices would never be sufficient and that we must link pension increases in future to the movement in average national earnings so that pensioners can be guaranteed a continuing share in our increasing national prosperity.
What about prices? Will the value of the increase be undermined before it comes into play? As I have pointed out already, we have left ourselves a record margin of 29 per cent. as against an increase in prices between the last uprating and February of 5.2 per cent.
Then there are the steps that the Chancellor has taken in the Budget to hold down prices of essential articles. The burden has been put on the less essential items, but, clearly, the holding down or the reduction of the prices of bread and milk are of crucial value and importance to pensioners.
All of us have argued about the need for a special pensioners' index geared more to take account of their dependence on certain basic needs. I hope that, before I conclude my speech, the House will be satisfied that we have geared our policy to ensure that the real value of this increase in terms of essentials is maintained as much as possible.
§ Mr. Michael Grylls (Surrey, North-West)
Will the right hon. Lady give way on that particular point? I am trying to follow her speech closely. It is obviously crucial how the value of these new pensions, which we all applaud, will be maintained. Will she comment on the observation made in the Press today by the National Association of Old-Age Pensioners that very few will be better off and that many will be worse off at the end of the day if we take the whole of the Budget into account?
§ Mrs. Castle
Obviously, the association has not yet heard my speech. I think that I shall have some reassurance for its members. It is quite wrong. Of course, it could not be expected to examine not only the Budget but the uprating details already announced and what I am about to announce. Had it been possible for it to do so, I do not think that it would have made a comment like that.
I was about to turn to a matter which I know is causing anxiety; namely, the effect of fuel price increases. A massive increase in electricity charges can be a body blow to an old-age pensioner. The Government are not unaware of this situation. We have not just taken a cash figure that looks good and then allowed it to be eroded in 101 different ways. We have tried to plan the beginnings of anti-poverty strategy.
Yesterday I told the House that the Supplementary Benefits Commission was looking urgently at the question of heating allowances. I am glad to be able to tell the House that the commission have decided to increase the discretionary additions which it makes to supplementary benefits where extra heating is required on account of ill health or other special difficulty. The existing amounts of 30p, 60p and 90p will be increased by one-third. The commission will give effect to the new rates from the same date as the increases in the supplementary benefit scale rates come into operation.
I am advised that the new heating additions take account of fuel price rises since the amounts of existing additions were fixed and of the further price increases announced by my right non. Friend the Chancellor of the Exchequer on Tuesday. Therefore, that point has been met.
645 The House will also be glad to know that the commission proposes to increase from the same date the allowances for special dietary expenses. These are currently 40p and 92p, and they will go up to 50p and £1.12 respectively
I expect that all right hon. and hon. Members know of cases where pensioners have been put in fuel difficulties not only because they were ill or in bad accommodation difficult to heat but because they lived in centrally heated premises. We all know of cases where pensioners could not meet their fuel bills. The present allowance for heating within the normal supplementary benefits scale rates is £1.20. From 22nd July this will be increased to £1.60 and £1.80 where it is impossible to distinguish between expenditure on heating and lighting or power for cooking. Where these allowances can be demonstrated to be inadequate for centrally heated accommodation, the amount of the excess can be met by an exceptional circumstances addition. In addition, when there is a long spell of severe weather and people generally have to spend more than they would normally spend on heating, special help in the form of a lump sum payment may be appropriate.
The arrangements that I have described will be of real assistance to old people who could otherwise suffer from the cold in the winter. It is our intention that they shall not suffer. Therefore, we have again insulated those in greatest need from the effects of our economic difficulties.
There is another point on the social security side in which I am sure the House will be interested. In the ordinary way an increase of income, such as pensioners and other beneficiaries will be receiving on 22nd July, would have to be taken into account by local authorities for their rent and rates rebate or allowances. Obviously we do not intend that the increases we have announced should be clawed back in part in this way, because that would defeat the whole purpose behind the increase.
My right hon. Friend the Secretary of of State for the Environment will be seeing to it that pensioners and others who receive these increases do not, as an immediate consequence, experience a reduction in the rent or rate rebate that they 646 already have. Rent and rates are taken into consideration in full in assessing supplementary benefits. My right hon. Friend, who will be announcing the details in due course, has told me that he intends that the increases in pensions and other benefits should not affect existing rent and rate rebates and rent allowances. Again, I hope that the House realises that we have secured that these shall be real increases in terms of the essentials of life for those concerned. We have made a start in the battle against poverty. I do not pretend that it is more than a start, but I repeat that it is remarkable in the economic situation that we have inherited.
In the meantime, we are pressing ahead with our long-term plans. For example, the child endowment policy and family allowances have been matters of concern particularly to many of my hon. Friends. I do not think that they can be matters of much concern to the Opposition Front Bench, because when they were in power they failed totally to keep their election promises on these matters. Therefore, I hope that we shall not hear anything from the right hon. and learned Member for Surrey, East about the lack of a child endowment policy at this stage. It will be costly if it is to be effective. It cannot be done on the cheap, and we cannot achieve it this year.
That brings me to the family income supplement. Yesterday I told the House that we were proposing to increase the prescribed amounts that govern entitlement to FIS. We do not like FIS. As soon as it is economically and administratively possible we want to replace it by our own non means-tested scheme. In the meantime, we must deal with the situation as it is. We cannot leave the poorest families without help, so an increase in FIS is necessary.
Therefore, we propose to increase the prescribed amounts to £25 for the one-child families with £3 for each additional child. The maximum amounts will be increased from £5 to £5.50—this applies to families with one or two children only —and for other families from £6 to £7. The effect of the uprating will be to increase weekly FIS payments, according to rounding, by £1.70 or £1.80 for a one-child family, £2 for a two-child family, and so on, increasing in steps of 20p or 30p for the larger families. Those already 647 on the maximum will get an additional 50p for one-child or two-child families and £1 for larger families.
§ Mr. Kevin McNamara (Kingston upon Hull, Central)
I am grateful to my right hon. Friend, and I am sure that all of us on this side who criticised FIS when it was introduced, as an inequitable system of trying to aid families in poverty, will welcome these increases. An important point relates to the most biting criticism which can be made of FIS. What steps is my right hon. Friend taking to ensure that all those families who are entitled to it will receive it?
§ Mrs. Castle
As my hon. Friend says, one of the big objections to FIS has been the low rate of take-up. I have been so busy in the last three weeks, so dizzy with the detailed statistical tables of the uprating, that I have not yet had time to give my mind to that point. However, I certainly will from now on.
Nor do we intend to abandon our long-term pension plans. As the House knows, we inherited the 1973 Social Security Act, which comes into operation in April next year, and many of the administrative preparations are already far advanced. We are committed to replace it, and that remains our long-term policy. Of course, we have come into office so near the date of operation that we face serious interim difficulties, and all those concerned with running occupational pension schemes need to know as quickly as possible what our plans, both interim and long term, are. I have told the House that we shall be announcing our interim plans as soon as we have had time to take breath and work them out. We intend to publish a White Paper embodying our long-term plans and we shall do so as quickly as the complicated issues involved allow.
I now turn to the health side. Inevitably, in these three breathless weeks, the attention, in this House and outside has tended to be concentrated on the uprating.
§ Mr. Norman Lamont (Kingston-upon-Thames)
On the point that the right hon. Lady has just passed from—her plans for the Social Security Act—is she aware that what she has said will cause acute uncertainty among employers who 648 are just at this moment setting up occupational schemes? The Secretary of State has said that she wishes to carry on setting us those schemes. When she talks about "replacing" the system, does she mean altering the balance between private schemes and the State Reserve Scheme, or is she using the word "replace" in the sense of replacing them totally by State schemes?
§ Mrs. Castle
The hon. Member cannot have attended our earlier debate when I dealt with this point. The industry has never been in any doubt about our long-term plans, or that we have a profound difference of principle with Conservative Members about their social security scheme.
I said in the debate on the Address, for instance, that the Conservative scheme would mean that large numbers of pensioners would have to supplement their pensions from social assistance well into the twenty-first century. It is inadequate, it will not do, it is unfair and, above all, it is unfair to women. I fought that battle when the Social Security Act was in Standing Committee; the hon. Member for Kingston-upon-Thames (Mr. Lamont) was on that Committee with me. He knows my views, and he would not expect me to sit back and agree to the perpetuation of what I consider an inequitable scheme.
On the other hand, we are taking full account of the difficulties in the interim period of those who are responsible for organising occupational schemes. We are in touch with them, and shall be increasingly in touch with them. So it is a two-tier process. We shall have to have an interim adjustment, because we cannot bring in our long-term plans in a matter of months; it will take more like two and more years. So we shall have to have an interim answer, and a long-term one. The interim one we are working on urgently; the long-term goal will be embodied in a White Paper which we shall place before Parliament as quickly as possible.
Turning to the health side, I realise that the National Health Service and its future and the policies that we shall follow towards it have inevitably been crowded out of the debates that we have so far had, but, after all, as I have said, these are early days. The fact that we 649 have had to concentrate first on the social security uprating does not mean that we intend to neglect the development of the National Health Service or those aspects of our policy which are designed to achieve two aims. The first is the democratisation of the rigid managerial structure that I have inherited from my predecessor. Second, we do not intend to neglect the need for steady progress towards the restoration of a National Health Service which is free at the point of use. These are the policies outlined in our manifesto, and we intend to proceed towards them as quickly as possible.
I have already explained that the massive reorganisation of the National Health Service which the right hon. Member for Leeds, North-East (Sir K. Joseph) carried through is coming into operation in three days. In that situation, I would be totally irresponsible if I were to try to stop it or reverse it at this point. We have to think of the patients first. We have also to think of the staff who work in this service, who have faced an upheaval with which we should sympathise.
We are now examining ways in which we can move towards greater democratic control of the National Health Service within the existing legislation and without altering the appointments which have already been made. We shall be issuing a statement on our proposals as a basis for consultation in a very short while. It is right that the House should recognise that reorganisation has put a tremendous strain on the staff. We should send them on their way with a word of thanks and encouragement.
§ Mr. Arthur Lewis (Newham, North-West)
I appreciate that the general scheme, which is coming into effect in three days, cannot be altered. However, I think that my right hon. Friend is aware of an anomaly which neither side of the House wanted. Many good hospital and health workers have been, and are, local borough councillors. The reorganisation means that they must give up those positions and will be unable to stand at the municipal elections, although they may want to; they are now deemed to have a vested interest. I understand that there are to be discussions with the Department of the Environment. Is it not possible at least to say that, pending investigation, these people should be allowed to con- 650 tinue as councillors and stand at the next election, until we see what we can do to help?
§ Mrs. Castle
My hon. Friend is right to say that this is a matter for the Secretary of State for the Environment. It clearly is not a matter under my control. However, I will certainly consult my right hon. Friend about this point.
I believe that it would be the sincere wish of the House to pay a tribute to the staff of the NHS and also to others who have helped them in the task of preparing themselves for this profound change in their lives. We are immensely grateful, for instance, to those universities and other institutions which have between them provided some 1,500 places for senior staff from the three parts of the existing National Health Service in integration courses giving them a wide insight into the new service, the tasks facing it and the staff affected.
Equally, I would pay a tribute to all those other institutions too numerous to mention by name which have, in addition to the great mass of professional and occupational education and training which is constantly going on, helped or acted as partners in other aspects of preparing for change—special courses and so on for those concerned with medical and dental administration, seminars for consultants and general practitioners, special training schemes for personnel officers and, within the personnel framework, for training officers also. This has been a considerable effort, and it is important to the success of the new service. We are all grateful to those concerned. I hope that in the coming months we shall have a number of debates on the health service in which we may together monitor the benefits of the reorganisation and work out future policies.
I turn now to deal with two specific points. Our goal is a free health service, and we shall move towards it as fast as the economic situation will allow. I have already made clear that we cannot this time round afford to abolish prescription charges outright. It would cost £50 million, and it just is not within our resources at present. However, as an earnest of our good intentions for the future we propose to make two easements of the situation now—after only three weeks in office. We propose that two 651 further groups shall receive prescriptions free of charge. I shall be laying regulations next week to raise the period in which children are exempt from under 15 to under 16 years of age. They will also lower the age from which women are exempt from 65 years to 60.
I know that a number of my hon. Friends have pressed repeatedly on these two points. They have been two serious anomalies even within the prescription charge scheme. Therefore, pending the time when we can abolish prescription charges, we thought it was right to move urgently on these two points now.
§ Mr. McNamara
Is my right hon. Friend aware that we very much regret that she is not able to abolish prescription charges entirely? However, her concessions on these two specific points will be met with universal applause on the Government benches. We have pressed for them for many years, and my right hon. Friend's announcement will be warmly welcomed outside the House as well as in it.
§ Mrs. Castle
I am most grateful to my hon. Friend. Of course, he is right. These points have been raised by him and by others of my hon. Friends time and time again because they were regarded as inexcusable anomalies. I am glad that it falls to me to announce their abolition so quickly. We should also thank my right hon. Friend the Chancellor, who has managed at this moment of his difficulties to find the extra £3 million a year they will cost. It is a small amount but nevertheless important when he is counting every penny.
§ Mr. Sydney Bidwell (Ealing, Southall)
My right hon. Friend says it will cost £50 million to abolish prescriptions completely, but is that the true net figure? May I suggest that the more exceptions she makes the greater will be the administrative costs? When the last Labour Government reintroduced prescription charges we made the point repeatedly that administrative costs absorbed much of the saving arising from charges.
§ Mrs. Castle
I remember my hon. Friend's passionate arguments on that point. I do not believe that the Treasury is as naive as all that. My hon. Friend cannot say that administrative costs 652 would mop up the whole £50 million. There would be a large surplus. Nevertheless, I am glad to have been able to take this small but very proper step.
§ Mr. Michael Alison (Barkston Ash)
The Chancellor has been kind enough, from the Secretary of State's point of view, to find £3 million to enable her to make this concession. Will he find £3 million to enable her to implement Baroness Sharp's recommendations? If he cannot find that £3 million, does she feel that the money for the prescription charge concessions is best spent on these pensioners and young people, many of whom are relatively well-to-do, or would it be better spent on the disabled, who are seriously inconvenienced and suffer serious immobility?
§ Mrs. Castle
I believe that the hon. Member is unintentionally misleading the House when he suggests that we could provide for the needs of mobility by the disabled by an additional £3 million. If he has read Baroness Sharp's report he will know that the cost has been kept down only by altering the whole eligibility criteria in a way which many of the disabled will resist. May I ask him to await the consultations which the Government have already started in great detail with disabled persons and their organisations to examine Lady Sharp's report and all its implications for our policy towards the disabled.
The new arrangements on prescription charges will come into force on 8th April, which is the earliest date on which we can get the necessary notices to the chemists and to the doctors who dispense medicines. It will be some months before new prescription forms can be printed, but in the meantime all that the newly eligible patients will have to do is alter the age on the prescription form before they tick the appropriate box and sign the declaration. Hospitals will be asked to make similar arrangements for out-patients. In view of the representations which the medical and pharmaceutical professions have made for exemption of these two age groups I am sure that we can rely on the cooperation of the professions in bringing the changes into operation from the earliest possible date rather than waiting some months until new prescription forms are available. Anyone in a newly 653 exempted group who has a prepayment certificate for prescriptions will be able to claim a refund for the unexpired period.
The cost of spectacle frames is another issue which my hon. Friends have raised. That cost can hit some family budgets particularly hard, especially as bad eyesight often runs in families. The cost of frames has increased, and I have had to decide whether or not to pass on these increases, which are due on 1st April, to the patient. I have decided that the patient shall not have to meet this further burden. Dependent on the type of frame, this will save patients up to 25p. I know that this is a small saving, but a small saving can be significant for some families and I am sure that it will be welcomed. In addition, I have made and laid before the House orders to ensure that charges for the replacement and repair of schoolchildren's spectacles, previously met by the local authority, will not have to be paid by patients but will be borne by the National Health Service. In view of these developments I say to my hon. Friends that we are on our way.
It is in the context of this move towards a free health service that I turn to a matter in which I know the whole House is deeply interested. For the last two and a half years Mrs. Justice Lane and her committee have been inquiring into the working of the Abortion Act. The committee submitted its report on 20th December 1973, and, in accordance with my policy of publishing all important reports with the least possible delay, I am pleased to be able to say that the Lane Report will be published on 3rd April as a Command Paper. I know that hon. Members and the public generally will take a very keen interest in the report and will wish to consider its recommendations carefully. Of course, I do not intend this afternoon to anticipate the report's findings except to say that the Lane Committee attaches prime importance to the development of family planning services and recommends the development of adequate and acceptable family planning facilities easily accessible in the community.
That there were 114,000 abortions last year, many arising from unwanted pregnancies, will be a matter of concern to all of us. My predecessor had already announced plans for a comprehensive 654 family planning service to be based partly on clinics and partly on the surgeries of general practitioners. His plans received widespread support from all sides of the House, and I have no wish to reverse them.
Family planning is already generally available under the National Health Service on medical grounds and from many local authority clinics on non-medical grounds. From 1st April it will be open at NHS clinics to all who ask for it, irrespective of age or marital status. This means all NHS family planning clinics, those run by hospitals, those which were before 1st April run by local health authorities, and those run on behalf of the NHS by voluntary bodies, such as the Family Planning Association. It does not include clinics which the association or other voluntary bodies continue to run independently.
Under the previous Government this service would have been free apart from the payment of the normal prescription charge, unless, of course, the person concerned happened to be exempt from this. We have decided that it would be wrong to impose prescription charges for family planning supplies obtained from NHS clinics and hospitals, and we do not, therefore, propose to make the necessary regulation which would have been required to impose prescription charges. From 1st April family planning supplies prescribed and dispensed at clinics and hospitals will be free of any charge whatsoever. As I said, I cannot abolish the prescription charges immediately, but I certainly have no intention of imposing new prescription charges. The cost of not imposing prescription charges in this regard will be £700,000 in 1974–75 and £1 million in a full year, when the service is fully developed.
My predecessor's plans for a comprehensive family planning service under the NHS would involve, as well as clinics, greater participation by general practitioners and hospital doctors in providing family planning in non-medical cases. My predecessor had already started negotiations with them about the basis on which this could be achieved. I discovered that, unfortunately, those negotiations have taken longer than planned and therefore it will not be possible to extend those parts of the service from 1st April.
655 This presents us with considerable difficulties. Clearly, having provided a free service in clinics and hospitals, it logically follows that we should adopt the same policy for the service which is to be provided by general practitioners, as soon as negotiations have been completed, to bring them into the service. I am as sorry as anyone that these negotiations cannot be completed in time for GPs to participate in the comprehensive service by 1st April and that the negotiations with hospital doctors for providing a service outside clinics for social cases are not completed. I am doing all I can to speed matters up and we are submitting evidence on GPs to the doctors and dentists Review Body and asking it to price the work involved.
Here I must sound a cautionary note. Much as I want to include GPs in the service, the final decision must depend on what will be the cost of their participating. Funds are not limitless. There are many other things that I am being pressed to do in the National Health Service. We must wait to see what emerges from the Review Body's considerations. The doctors, too, wish to consider their position when the Review Body has reported.
Until then I have no alternative but to ask GPs to continue to provide family planning services on the same basis as at present. This means that they will continue to give advice without charge, but they may make a charge for issuing private prescriptions in social cases and the patient will pay the chemist the full costs. It means that prescriptions for medical cases will carry the current prescription charge. I assure the House that as soon as we can reach agreement with the GPs on the conditions on which they will participate in the new service, I will make regulations exempting from charges the family planning supplies which the GPs prescribe.
Regarding the extension of family planning services in hospitals, including vasectomy, I shall be discussing further with the medical profession what the long-term arrangements should be. The principles of the contracts of senior medical staff are to be examined by the joint working party I announced on 15th March. In the meantime, the new health authorities will operate within the terms of the previous arrangements. During the interim period 656 they will not be expected to expand deliberately the work being done in hospitals, and I shall shortly issue guidance to health authorities on their family planning services.
§ Mrs. Renée Short (Wolverhampton, North-East)
I am obliged to my right hon. Friend for her statement about the availability of family planning services without charge at National Health Service hospitals and clinics. I am delighted that such progress is being made, and I hope that it will not be long before it can be extended completely. Can my right hon. Friend undertake that in order to publicise her new proposals she will embark on a considerable advertising campaign to let the general public know that they can go to NHS hospitals? I hope that my right hon. Friend will not allow inhibitions—for example by the London Transport Executive—to prevent such advertising. Is she prepared now, in order to see that the services which she proposes are carried out successfully, to have discussions with the University Grants Committee to ensure an improvement in the training of medical students so that family planning matters are included in the medical curriculum, which is not the case at present at all teaching hospitals?
§ Mrs. Castle
I share my hon. Friend's hope that it will not be long before we have a comprehensive, free family planning service. It will not be my fault if this does not come about. It will be because matters which I have already outlined have gone wrong. I shall certainly bear in mind my hon. Friend's points.
§ Dr. Michael Winstanley (Hazel Grove)
I welcome the right hon. Lady's important statement. However, does she accept that many GPs believe that provision of family planning services to their patients ought always to have been part of their contracts of service as GPs to their patients? Until she can negotiate new arrangements to bring it within the NHS for ordinary GPs, will she look favourably on GPs who liberally interpret the question of the need for contraceptives on an ECIO prescription form, as a medical need?
§ Mrs. Castle
I am not sure whether it is for me to monitor the clinical decisions of doctors. The hon. Gentleman, 657 in his worthy enthusiasm for the scheme, may be drawing me on to dangerous ground. I hope that his friends in the medical profession take careful note of what I have said. I hope also that it will not be long until we find a solution to all our difficulties in this matter.
I have detained the House longer than I intended, but this happens when one is interrupted so frequently. But it is an important matter and I appreciated that the House wished to have clear particulars. That is why I have spelt out my proposals in considerable detail. In this way I hope that maximum publicity will be given to my proposals.
This is my interim report over the whole field of my activities. I hope that it will be my pride and pleasure to make further progress to the House from time to time.
§ 4.49 p.m.
§ Sir Geoffrey Howe (Surrey, East)
When the right hon. Lady yesterday announced to the House details of the changes which were to be introduced in social security benefits I made clear the extent to which these were welcomed by the Opposition. I now wish to make it clear that one of the less agreeable features of the right hon. Lady—although she has acceptable and agreeable faces, as well—is the extent to which, whenever, after an election, she makes announcements of this kind in the House, she approaches the matter as though, at last and for the first time, some great new developments are about to take place. This afternoon she said: "We have made a start." It is this possessive, arrogant, disregarding attitude of the Labour Party towards the social services which we regard as unacceptable.
I wish to make clear that my right hon. and hon. Friends have for many years in the past made substantial contributions and will, we hope, do so in the future, to the advancement and improvement of the health services and social services of this country. After all, it was not the last Labour Government who introduced pensions for the over 80s or increased benefits for younger widows. It was not the last Labour Government who introduced for the first time benefits for the severely disabled and the chronic sick, as well as a pattern for an annual updating of social benefit reviews. Nor did the last Labour 658 Government achieve, as the Conservatives did, a higher growth of real expenditure on improvements of services for the elderly, the mentally ill and mentally handicapped. Nor did the last Labour Government, to judge from the observations of Richard Crossman, produce a fair deal for the pensioner. That is the history. If I may borrow a saying that the right hon. Lady will not forget— "Why read the crystal when one can read the book?"
The last Conservative Government, with the powerful leadership, in this field, of my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) did a vast amount to improve the social services in terms of cash and care. It is arrogant nonsense for the right hon. Lady to talk about making a start. She has made a substantial increase—we do not disregard this—in cash benefits. But we want to know how far that will be of realistic value, and how far she is making an intelligent choice of priorities; how far her social aspirations will be supported by the economic policies of her right hon. Friend; how far, at the end of the day, when the Labour Government fall, will it appear to be the case that they have achieved real progress in improving social services for the people of this country. That is the test by which we were glad to have been judged and as a result to have received the support of the overwhelming mass of the pensioners and old people in the last election.
The pension increases announced by the right hon. Lady were cash bids made by her party as long ago as 1972. They come into effect some time this summer. The increases fall far short of the real percentage increase in value which the right hon. Lady is claiming for them, even taking into account the improvements in heating allowances about which I was glad to hear, and about which I asked the right hon. Lady yesterday, and the arrangements she hopes to make in relation to the rent and rate rebates.
When one considers the impact of the substantial increases in indirect taxation, adding 14 per cent, to the cost of living; the increases in the prices charged by nationalised industries, which my right hon. Friend the Member for Carshalton (Mr. Carr) made clear yesterday cannot to some extent be challenged in principle; and the unquantified consequence of the 659 increased employers' contributions, about which the Paymaster-General was less than precise last night—when one considers all those matters, one wonders just how well the increased cash value of the pensions will look in 12 months' time.
After all, what do the Chancellor of the Exchequer or any of his colleagues expect the rise in prices to be, in relation to which the pension increases will have to be effective, apparently, for at least 12 months? What will the purchasing power of these pension increases be next April, which is when we should have been introducing our six-monthly review of benefits? Will the pensions now proffered by the right hon. Lady be at the level which pensioners could have received if pensions had been subject to our clear commitment to a six-monthly review of pensions and other social benefits?
§ Mr. McNamara
Can I take it from what the right hon. and learned Gentleman has said that six months from the date of the announcement of increased pensions and other benefits we shall have from the Opposition a statement of what the level of benefits would be if they were in power, and that we shall have such a statement every six months thereafter?
§ Sir G. Howe
The hon. Gentleman must learn to appreciate that his party is now in government and takes its responsibility for what is or is not being done. What I am saying is that we committed ourselves to a six-monthly review of pensions and other benefits, which represents a logical step forward from the annual review which we introduced and on which the right hon. Lady is now so glad to be building. That is a perfectly logical development of our policy, and it is not clear why the Government have rejected it.
Moreover, what will be the value of the right hon. Lady's pledge to raise pensions annually in line with earnings? How far will that compare with the achievement of our Government? Over the period from June 1970 to this month, average earnings went up by 50 per cent. and average pension levels went up by 55 per cent., well ahead of the rise in prices, and far ahead of the performance of the 660 Labour Government that preceded us in office until 1970.
The question the country may well be asking itself before very long under the present Government is whether earnings will rise ahead of prices, and whether the pledge to keep pensions improving in line with earnings is of any significant value. [Interruption.] I am just posing the question for Labour Members to ask themselves. With the additional thrust to the rate at which wage claims are likely to rise, with the tax push that the Chancellor has deliberately injected into his Budget, and with the cost push that that will deliberately inject into the price level in our shops, it is a moot question whether earnings in the next 12 months will rise as fast as prices under the economic policies of the present Government.
§ The Chancellor of the Exchequer (Mr. Denis Healey)
May I ask the right hon. and learned Gentleman to confirm the conclusion I have drawn from what he has said, that he is now confident that the present Government will keep the rise in earnings below the increase in prices? If that is so, what was he fighting the last General Election about?
§ Sir G. Howe
I do not follow the inwardness of the right hon. Gentleman's question. I am trying to discover precisely what the right hon. Gentleman's Budget Statement means. If he is confident, as his intervention appears to imply, that the rise in earnings will be below the rise in prices, he is confident that there will be a fall in the real living standards of the people. That is the point my right hon. Friend made yesterday. The Government have failed to spell out that consequence. That is the important question to which people will want to know the answer.
I turn to what the right hon. Lady said about the second question, the consequences of the Social Security Act 1973. She and her right hon. and hon. Friends fought that Act through Parliament during the last Session. It now represents a firm foundation for a long-term pension policy for the country. Alongside the progressive improvement in the State basic pension, which went ahead under the previous Government, there was to be growing up a second, funded, occupational set of pension schemes. The people, 661 the employers and those whom they employ, have come to accept that as a sensible way forward.
Now the right hon. Lady arrives on the scene committed to a long-term dismantlement of that. Worse than that, she is committed to an interim dismantlement, acknowledging that those concerned with these matters need to know what will happen, and yet not making any statement or giving any assurances on which employers and those concerned with pensions can begin to build for the future along the lines approved by the House in the last Session.
This is one of the other regrettable features of the way in which a Labour Government come to power, as did the 1964 Government, committed to some grandiose reconstruction of the pension schemes, committed therefore to years of uncertainty, confusion and obstruction of the growth of that which should be taking place naturally and effectively upon the basis of the legislation passed by the last Government. The right hon. Lady must, as soon as possible, remove the uncertainty, doubt and anxiety, and make it plain to the employers, those who run pension schemes and the workers that they can go ahead on a firm basis to extend the scope and scale of supplementary pensions schemes on an occupational basis. It is her first responsibility, and we shall press her to do that as hard and as often as we possibly can.
The Secretary of State said very little —indeed, nothing—about the changes being made in short-term benefits, save to point out that the differential between the increase in short-term benefits and long-term benefits was being maintained. We are glad that she recognises the importance of maintaining that difference in principle. The benefits are of a different quality, and it is right that they should be so treated.
The Secretary of State spoke also about the reorganisation of the National Health Service and paid a tribute, in warm terms, to the training and reorganisation being done by the staff in all branches of the service. Tribute deserves to be paid to my right hon. Friend the former Secretary of State and his colleagues in the Department for all that they did to get that massive and important scheme of reorganisation moving ahead smoothly. 662 I am glad that the right hon. Lady has the wisdom not to disturb that.
We are disturbed, though, by the way in which the Secretary of State comes back yet again to the Government's commitment as a matter of doctrine—although not this week—to the establishment of a health service which is to be free at the point of use. This was the cry of the 1945 Labour Government; it was the cry and the attempt and the failure of the 1964 Labour Government and, so it seems, it is to be the cry and the attempt and the failure of the present Labour Government, too.
It is absurd, when there are so many pressing needs on limited resources available for the National Health Service, to attach such importance to the abolition of charges across the board and to regard that as an important objective. The former right hon. Member for Sowerby, Mr. Houghton, in the last Parliament clearly recognised that charges have a legitimate rôle to play in the operation of a health service and are an important way of raising the resources to meet the huge needs.
I would not quarrel with the two specific changes that the right hon. Lady has made; raising the age from 15 to 16 for children and bringing the age for women into line with their age of retirement. It is worth pointing out that the change from 15 to 16 for children is a logical consequence of the last Government's success in raising the school leaving age to 16, a change which the previous Labour Government found themselves unable to carry through, despite the fact that they were committed to it. It follows sensibly from that.
We welcome the early publication of the Lane Committee's Report on the important question arising from the Abortion Act. That will need to be carefully studied. We should not go along with such enthusiasm as the right hon. Lady with a decision to move towards a totally free family planning service. There are many pressing needs within the National Heath Service, and one of them is in relation to the Sharp Report. The cost of implementing the Sharp recommendations, which represent an improvement—we can discuss the distinctions in detail later—would amount to £3 million. The probable cost of a totally free family planning service would be about 663 the same. It is that kind of comparison or choice of priorities that has to be made. The right hon. Lady must know that many people would not attach the same priority to a free family planning service as she does.
The whole basis of the approach of the Labour Party to the wider issues underlying the Budget in social matters should be questioned, particularly the importance that the Government have attached to the use of general food subsidies to the extent of £500 million, as announced by the Chancellor of the Exchequer in his Budget Statement. Subsidies of that kind have an indiscriminate effect. They appear to be composed to the extent of about £300 million in terms of a subsidy on the price of milk for all families, which will reduce the cost of living by about 0.75 per cent., to some extent a subsidy on bread, and some other quite modest and undisclosed figures.
The total impact of those food subsidies, according to the figure produced by the right hon. Member for Birkenhead (Mr. Dell) yesterday, will be a reduction, or a non-increase, in the retail price index of about 1½ per cent. That single figure was overwhelmed in last month's figure and will be overwhelmed in next month's figure. It will be completely overwhelmed by the increases in indirect taxation that have been announced in the Budget Statement. Although the solution of general subsidies was urged upon us frequently, we believe that we were right to resist their adoption and extension in the way the Labour Party has chosen.
§ The Chief Secretary to the Treasury (Mr. Joel Barnett)
But the Shadow Chancellor when answering my right hon. Friend yesterday would not concede that he would have gone as far as we did on nationalised industry subsidies.
§ Sir G. Howe
My right hon. Friend said nothing of the kind. Yesterday my right hon. Friend referred to what my right hon. Friend the Member for Altrincham and Sale (Mr. Barber) said in December—that one of the consequences of the change in energy prices would have to be a review of the prices of nationalised fuel industry services. That was something to which we were 664 clearly committed from December onwards. We also made it plain then that that would need changes in the social service system, including such things as the heating allowances which the right hon. Lady has now disclosed. What we made perfectly plain, and what I think will still prove to be manifestly true to the people of this country, is that general food subsidies to the tune of £500 million are, and will be, wasteful.
§ Mr. Healey
The right hon. and learned Gentleman is opposing a general subsidy on basic foodstuffs, which form the major part of the old-age pensioner's budget. He will be aware that we are still paying £500 million in indiscriminately subsidising the nationalised industries. Does he regard that, too, as far too much to pay in subsidies? If not, will he tell us how much more he would have increased the nationalised industry prices than we are increasing them?
§ Sir G. Howe
I am acknowledging the wisdom implicit in what my right hon. Friend the Member for Carshalton said yesterday and what my right hon. Friend the Member for Altrincham and Sale said about reducing the prospective growth in the increase in subsidies to the nationalised industries. The right hon. Member is well aware that some of those are in any event directed to specific social purposes—transport, for example.
§ Sir G. Howe
I will not give way again.
What I am challenging is the wisdom of adding to that a generalised subsidy on a small range of foodstuffs, because to do so raises this question. Having gained the advantage of a 1½ per cent. check in the movement of the retail price index, but nevertheless having accompanied that by other price increases and other indirect tax increases, which will themselves thrust the retail price index directly upwards as the result of what the right hon. Gentleman is doing, how much further do the Government propose to go with food subsidies?
§ Sir G. Howe
How much longer do they propose to go on? How much do they propose to allow people to see a rerun of the movie that ended with the 665 declaration by Sir Stafford Cripps in 1949? This is the reality.
We had a period over a number of years when food subsidies went up and up each year until eventually Sir Stafford Cripps had to tell the people that, whatever happened to prices, we must not allow subsidies to rise above the fixed level, which was then £465 million.
Subsidies in a general form are no solution. They obstruct the capacity of the Government to introduce more selective and more effective social remedies. They obstruct the capacity of the Government to keep down taxes. This is the error to which the right hon. Gentleman has committed himself and which he will live to regret.
§ Mr. Healey
It would be helpful if the right hon. and learned Gentleman could answer the question that I put to him. He says that it is not right to subsidise milk and basic foods for ordinary people, particularly the poor, to the extent of £500 million. Does he think that £500 million is too large a subsidy to pay to the nationalised industries for, among others, social reasons affecting indiscriminately all sections of the population? I put this question to his right hon. Friend yesterday but he dodged it completely.
Both the right hon. and learned Gentleman and his right hon. Friend must know that we have had to raise nationalised industry prices in order to reduce by £900 million the deficit left to us by the previous Government. Nevertheless, we are subsidising nationalised industries still by £500 million. Does he think that it is too much? If not, why does he think that £500 million is too much to spend on subsidising basic foods?
§ Sir G. Howe
It was, and is necessary for any Government to reduce the extent to which prices of nationalised industry products get out of line with the cost of producing them and out of line with their market value. It was necessary, in addition, to ensure that the price of coal reflected the consequences of the settlement in the coal mining industry. It is for the right hon. Gentleman to make his judgment about the amount.
§ Sir G. Howe
The right hon. Gentleman should recollect that on 17th December my right hon. Friend the Member for Altrincham and Sale made perfectly plain that increases in these prices would have to come. It was perfectly plain that they would be dealt with in the Budget which my right hon. Friend would have introduced. There is all the difference in the world between ensuring that economic prices do not move further away from sensible levels and intervening, as the right hon. Gentleman has done, by raising additional taxes to introduce quite fortuitous extensive general subsidies on food, indiscriminately to the advantage of rich and poor alike. This is the opportunity he has missed. He will regret that he has had to spend as much as £500 million on food subsidies in this way.
It is now clear to the people of this country that having a Labour Government necessarily involves higher taxes in support of indiscriminate social benefits, that having a Labour Government necessarily involves higher taxes which do not fall just upon the rich. The increases in direct taxation of almost £1,000 million in the right hon. Gentleman's Budget will fall on a wide range of ordinary income earners and workers. It will affect, for example, those struggling either to commence or to complete house purchase. It will affect the composite rate of tax paid by building societies. It will affect the rates payable by such house purchasers. It will affect the married couple without children from an income level of £34 a week upwards. It will have a dramatic effect on the typical couples in this country now where both the man and woman are at work. There are 5 million working wives, so that there are two incomes coming into the home perhaps producing an average joint income of £50, £60 or £70 a week.
For all those people, many of whom are striving to buy their own homes, the tax increases introduced by the right lion. Gentleman will be substantial. In particular, the reduction from £5,000 to £4,500 of the level at which surtax begins to be paid will have a sharp effect on people in the very groups which the Chancellor ought to help; for example, senior hospital registrars or deputy headmasters, leaving aside the executives and junior managers upon whom the success of this country depends.
667 It will also have an effect upon the appetite for wage claims, as we see in today's papers, of people employed in the engineering industry and members of ASLEF. We shall look with interest upon the extent to which those unions and their members go along with the so-called social compact about which we have heard so much. We shall ask with interest what prospect there is, against that background, of getting fair pay for groups such as nurses, teachers, and health service ancillaries.
§ Sir G. Howe
We shall ask what prospect there is of fair treatment for them when the Government have apparently disregarded and set aside the prospect of their claims being, referred to the relativities board or any comparable machinery. We shall look with interest also at the impact of the measures proposed by the Chancellor of the Exchequer upon many families living in retirement on small fixed investment incomes which are to be more severely taxed from the level of £1,500 upwards.
The consequence of introducing such large general subsidies is not merely a rise in taxation; it is the rejection of many alternative social policies that would have been a great deal more advantageous; a more substantial improvement in the earnings rule; larger and swifter improvements in benefits for the disabled; assistance for separated—
§ Mr. Healey
Where has the right hon. and learned Gentleman been for the last three and a half years?
§ Sir G. Howe
It is all very well for hon. Gentlemen opposite to speak in that way, but where have they been for the last three and a half years if they have failed to see the massive and progressive improvement in social benefits introduced by the previous Government? They have no monopoly of effectiveness in this field. Hon. Gentlemen opposite disable themselves from pursuing effective social policies by the extent to which they commit themselves to high taxes and indiscriminate social benefit. Why have the Government not thought it better to make some move at this stage towards an improvement in the arrangements for family allowances? If they reject—as apparently 668 they do—the tax credit scheme, we welcome their acceptance of the family income supplement scheme. I was glad to notice that the right hon. Gentleman the Chancellor of the Exchequer did not altogether reject, or close the door upon, some variation of the tax credit scheme, because somewhere along the line we have to find the best way of combining the tax system and a system for the relief of poverty.
All these options in this Budget have been closed to the Government because of the extent to which they have been committed to general benefits and higher taxation. The truth is that the benefits of this Budget, such as they are, will turn out to be illusory. It purports to offer benefits that are free when they are not; it makes a substantial contribution to rising prices and lowering living standards without saying so; it distributes such benefits as it does in a way that is more wasteful than the alternative that could have been chosen. Above all, it conceals the realities of the gravity of the situation facing the people of this country.
It suggests—this is the central fallacy that underlies the thinking of the Government—that we can advance the social condition of the people of this country by redistribution. We have passed that point, and right hon. and hon. Gentlemen opposite ought to have recognised that. It implies—this is the illusion that will gradually be destroyed by this Budget—that the rich, and, above all, productive industry, can bear the cost and the consequences of making the people of this country more equal. The people of this country do not want equality. They want fairness, as do the Opposition, but we do not believe that fairness can be achieved without at the same time setting off in pursuit of increased prosperity, increased investment and increased saving and acknowledging the rôle that can be played by increased profit.
That is why I close on the same point as my right hon. Friend the Member for Farnham (Mr. Macmillan) did yesterday. This is a Budget which curtails the advantages open to those who save; it curtails the advantages open to those who invest in industry; it curtails the advantages open to those who take risks and accept responsibility for improving the performance of our industry, and it threatens the 669 prospect of success and prosperity for the future of this country.
We must face the fact that the growth, prosperity and resources of this country depend upon the success of our own productive industry. That industry cannot possibly achieve what we expect of it if it has to face the imposition and burden of high and rising taxation, which it faces already under this Government, and which it would continue to face if the present Government were ever able to introduce another Budget. That is why we in the Conservative Party hope and believe that this is the last Budget that the present Chancellor will have an opportunity of introducing.
§ 5.20 p.m.
§ Mrs. Audrey Wise (Coventry, South-West)
I am grateful to the House for this opportunity to address it. I come from a new constituency: Coventry, South-West. Therefore, it is a little difficult for me to follow the customary conventions of courtesy. However, I should like to mention that a large number of my constituents had the pleasure of being represented by my hon. Friend now the Member for Coventry, South-East (Mr. Wilson).
I am grateful, too, for the help and kindness that my hon. Friends have shown me in explaining the somewhat obscure procedures of the House. I am grateful as well to the right hon. and learned Member for Surrey, East (Sir G. Howe) for the note on which he ended his contribution, which explained so clearly the priority given by the Tory Party to the question of high profits. My constituents will be most interested to notice the spelling out in such kind and welcome detail of the facts that hon. Members opposite are conscious of the dangers of indiscriminate social benefits but quite oblivious of the dangers of indiscriminate tax hand-outs to the well-off. We never hear the merits of the case for hand-outs to the rich such as my right hon. Friend the Chancellor's predecessors accomplished in their Budgets over the past few years.
I am grateful to my right hon. Friend the Secretary of State for Social Services for her statement and for her emphasis that this is a beginning in improving the social services. It is not only we on this side of the House who have escaped 670 noticing the great improvement in the social services which has taken place over the past three and a half years. My constituents have frequently escaped this blinding knowledge.
There are so many casualties of this kind in society that, however good we become in arranging ambulance services to pick up the victims, I fear that unless we make basic changes in the nature of our economy we shall never have sufficient ambulances for all the casualties. The problems that people face do not lie only in the realms of social service, nor are problems faced only by pensioners. I am extremely concerned about the situation in respect of owner-occupiers.
I have not really had the privilege of deciding the subject of my own maiden speech. I have had it pressed on me by a telegram from the leader of the Coventry City Council, urging me to make representations to the Government on the need for action to restrain mortgage interest rates. I am asked, too, to express Coventry City Council's pledged support forany move to enlist further local authority involvementin the question of mortgages. I am sure that the sentiments expressed by Coventry City Council are shared by many other local authorities, which are extremely anxious and disturbed at the plight of owner-occupiers. I urge my right hon. Friend to look closely at any possibilities which may exist for short-term amelioration or cushioning of the effects of the increasing mortgage interest rates.
My right hon. Friend was correct when he said in his Budget speech that there is no short cut on this question. In talking to the many owner-occupiers in my constituency during the course of the election campaign I was careful to make it quite clear that, if they sent me to the House in the hope that I would add my voice and efforts to those being made on the question of mortgage interest rates, what they were, in fact, asking me to do was to help to make basic and fundamental changes in our whole capitalist system.
I share with all my right hon. and hon. Friends the admiration which has been expressed in many quarters at the sheer scope and complexity of this Budget Statement. It is certainly a remarkable achievement in the short time available. Equally certainly, it is simply a beginning. It is not even a halfway house. It 671 is an attempt to juggle with the horrible situation which we inherited from hon. Members opposite.
I am one of many on this side of the House who consider that if we are to build on this beginning we shall have to take urgent and serious steps to gain control of our own economy. I and my constituents have noticed repeatedly that when the phrase "the national interest" is used it usually prefaces a statement that the nation cannot afford something which I and my constituents and my hon. Friends want and need very much. It always prefaces a statement that, for instance, we cannot afford better social or medical benefits or better treatment for the disabled. Somehow or other this nation cannot manage to afford those things, and, despite the valiant efforts of my right hon. and hon. Friends now, we are still left with the situation where we cannot afford anything like the improvement which people look to this Government to provide. We shall never be able to afford them until the nation controls the nation's economy.
I urge my right hon. Friend to look very carefully at the activities—indeed, the machinations—of the multinational companies and to bear in mind the distortion of the pattern of trade of this country which is implicit in their activities. A very large proportion of our foreign trade is not so much trade between buyers and sellers in the normal way, where prices are fixed as between buyers and sellers, but simple transfer between one section of a giant multinational company and another section. Therefore, the constraints that normally apply in fixing prices between buyers and sellers do not apply at all in this kind of transaction.
I urge my right hon. Friend to look carefully at the effect of this on, for instance, the balance of payments. It has a triple effect. Transfer pricing, which can mean overstatement of prices of imports into this country, adversely affects the ceiling level of the balance of payments. It understates profits, causes an Exchequer loss, and causes an inflationary effect on the prices being paid by consumers for imported goods. I should like my right hon. Friend to give serious consideration, first, to obtaining information about these aspects and, secondly, 672 to tackling them so that the country can run its own economy.
I should like to express my disappointment at the fact that my right hon. Friend dismissed in 11 lines the possibility of instituting direct control of imports. I do not think that in a speech which occupies 51 columns of HANSARD 11 lines are sufficient consideration to give to the question of direct import control. I am not a professional economist, but I am not impressed by the handling of the economy which has taken place over so many years under the direct advice and nursing of so many professional economists. I suggest to my right hon. Friend that if resources or foreign currency are scarce there is a certain logic in saying "Let us import what we can afford and what we most need." Therefore, there seems to be a good case for import controls at the very least on luxury goods. I hope that by the time my right hon. Friend presents his subsequent Budget he will have given this matter a good deal more consideration.
As a Member representing the city of Coventry it behoves me to have particular concern for the interests of my constituents. Whilst again expressing my admiration for the achievements of my right hon. Friend in the production of this impressive Budget, I draw his attention to the feelings which will arise in my constituency concerning the petrol tax.
I noticed that my right hon. Friend's reason for introducing VAT on petrol is not simply a financial one. He argued the case not in financial terms but as a means of conservingour supplies of oil and to reduce the pressure on our road system and to make life more tolerable in our towns and countryside. This will help to ensure the economic use of scarce resources".— [OFFICIAL REPORT, 26th March 1974; Vol. 871, cc. 309–10.]Many hon. Members on the Government side do not think that we can ensure the correct use of scarce resources by increased prices. We do not think that those who can afford to pay more necessarily have a better claim to the use of petrol or of any other scarce resource. I urge my right hon. Friend, when considering transport, to do it as an exercise in transport policy and not as an exercise in taxation policy. I also suggest that any approach to transport which does not take into account the views of persons 673 engaged in vehicle building will be an inadequate and unsatisfactory approach to transport, since it inevitably involves the use of vehicles. At present, decision making in this area is in private hands. It is not in the hands ultimately of elected representatives of the people, nor of workers in the industry, nor of users of our transport system.
As a Member representing the city of Coventry, I urge that we want proper use of petrol but that we do not appreciate this particular action by my right hon. Friend and we look forward to a situation where transport decisions are made by those involved in transport work and vehicle building—in other words, the democratisation of this area of decision making.
In conclusion, I should like to say that this is entirely in line with the policies on which I and my hon. Friends fought the General Election, not only for the redistribution of wealth, which we are starting—I look forward to seeing further instalments in the near future—but for the redistribution of power which at present is used indiscriminately in private and irresponsible hands. I look forward to the time when we move on to judging our investment and other programmes on the basis of public need and public decision, taken openly in the best democratic traditions of the House, and extending those democratic decisions to areas which at present are completely closed to any but private closed-doors decision making.
§ 5.37 p.m.
§ Mr. Peter Viggers (Gosport)
I am greatly obliged to you, Mr. Deputy Speaker, for this opportunity to catch your eye and to make my maiden speech.
It is not for me, as a maiden speaker, to congratulate the hon. Lady the Member for Coventry, South-West (Mrs. Wise) on behalf of the House upon her own maiden speech, although I should like to congratulate her on the clarity of her exposition, and to say that I am inclined to agree with her views on economists, that I share her concern for owner-occupiers, but that I do not go far along the road that she has put before us this afternoon.
I have the honour and responsibility to represent the new constituency of 674 Gosport. Gosport was previously represented as part of South Hampshire, and later it became part of the constituency of Gosport and Fareham. In the 1970 election, the constituents of Gosport and Fareham numbered more than 100,000. That constituency was split to form the separate constituencies of Gosport and Fareham.
The previous Member for the joint constituencies of Gosport and Fareham is now my hon. Friend the Member for Fareham (Dr. Bennett). It is a tradition of the House that maiden speakers pay tribute to their predecessors in the constituency. It is for me to pay tribute not to any immortal shade but to the real and continuing presence of the hon. Member for Fareham. It takes a man of substance to be split in two and to produce two Conservative majorities of 7,000. I know that the people of Gosport would certainly wish me to thank the hon. Member for Fareham most heartily for all the work he has carried out on their behalf over the past 24 years and to wish him well in his constituency of Fareham.
Traditionally, maiden speakers are allowed the indulgence of a description of their constituency, and that indulgence I should like to take. I was born in Gosport; it is my home town. Gosport consists of the municipal area of the district of Gosport. It includes Bridgemary, a council housing estate, and Rowner, a new housing estate of owner-occupied houses, as well as Lee-on-Solent, Alverstoke and the older established areas of Gosport. It is superbly situated, looking across Spithead towards the Isle of Wight and across Portsmouth Harbour to Portsmouth.
There is a popular misconception prevalent in this country that Gosport is near Portsmouth. That is not strictly true. Any of my constituents will say that Portsmouth is near Gosport. Gosport and Portsmouth are traditional neighbours and friends who exchanged cannon balls during the Civil War, and I am delighted to say that on that occasion Gosport was on the side of Parliament.
In a television programme recently it was said that Gosport is the Royal Navy and the Royal Navy is Gosport. We have in Gosport the Royal Naval Armaments Depot, Victualling Yard and Aircraft Yard. We have a submarine base at 675 HMS "Dolphin". We have various naval units at HMS "Sultan". At HMS "Daedalus" we have an air-sea rescue unit, and the Inter-services Hovercraft Unit. We have a Royal Naval Hospital at Haslar. We have the computer centre, the dental school, the physiological centre and many other naval units. Gosport is very much a Services town.
There are many Service personnel stationed in Gosport. It is an attractive place to put down roots—or perhaps I should say to "make fast ashore"—and it is a popular area for retirement. It is a well-known sailing area. There are three popular dinghy sailing clubs as well as a marina at Camper and Nicholson's world-famous boatyard.
I understand that it is a tradition that maiden speakers sometimes seek to entice right hon. and hon. Member to visit their constituencies. I have no need to seek to entice right hon. and hon. Members to visit my constituency if they are interested in yachting and boating. Indeed, we cater for all classes of yachtsmen. Not everyone can be in the Admiral's Cup team, and we have a school for beginners in sailing.
We have some light industry, most of which has been established since the war. We have about 3,500 people employed on television assembly at the Thorn Electrical Company factory at Bridgemary, and Cyanamid and Lederle have pharmaceutical companies there.
I share with my constituents a great concern for defence. It is not only the people who serve in the Armed Forces who are concerned about defence in Gosport. We find that this concern is shared by the widows of Service men and, indeed, by retired Service people, because people who devote their lives to the Armed Services believe in what they are doing. They are dedicated. They believe that the years of peace that we have had since 1945 are not an excuse for reducing the Armed Services and our defence expenditure but that these years of peace are a tribute to the work carried out by the people in the Armed Services.
I believe that the £50 million reduction in defence expenditure in the Budget, which is a reduction in expenditure on men and equipment, is in all the circumstances not unreasonable, but I promise 676 to pay healthy attention to the review of defence expenditure that is now suggested.
This afternoon, so far, we have been talking mainly about golden eggs. I am sure that all hon. Members share the view that we should give great regard to the way in which money is spent, but I wish to look for a moment at the health of the goose. It simply is not good enough to give all our attention to the distribution of the budgetary amounts available. We must look at the health of the economy, and I am not entirely certain that enough attention has been paid to this.
I take one specific area—North Sea oil development. I am not concerned now about the ownership and the taxation of the oil that comes out of the North Sea. I set that aside for the time being.
There are three phases in the development of an oilfield. First, there is the exploration phase, when, of course, we need the expertise of foreign companies. Then there is the development phase, when the fields are actually developed. That is when the money and men are needed. Third, there is the production phase. Nothing very much happens or is seen to happen during the production phase. There are not very many job opportunities or investment opportunities. All that we are getting is a healthy return for our balance of payments. That, of course, is fine. But the main opportunities—the opportunities for investment, the opportunities for creating jobs arise during the second phase, the development phase of an oilfield.
It is calculated that about half of all the industrial investment that will take place over the next few years will, in the broadest sense, take place in the development of offshore oil. There is a huge range of industrial opportunity for Scotland and the rest of the United Kingdom. There is opportunity to participate in the construction and assembly of rigs; to sell pipe for oil pipelines; there is "drilling mud"—indeed, expenditure on "drilling mud" constitutes 15 per cent. of the cost of drilling an oil well. There is opportunity for sales of concrete and all kinds of technical products and the development of all kinds of skills.
The development of the North Sea oilfield will take place in the most appalling weather conditions. The water depth is about 400 to 600 feet, and the planners 677 have to cater for storms with 100 foot waves, 150 mile-an-hour winds, a water temperature of 4°C and air at freezing level—weather conditions which create the Scottish temperament.
Any country whose industries can cope with this challenge can then go on and operate world-wide. What we have to do is to…develop a long-lasting oil-related industry which will be there when the companies have moved into other waters … and … we can do it only if it is an indigenous industry in which we own the new technology, techniques and expertise which is developed."—[OFFICIAL REPORT, 20th March 1974; Vol. 870, c. 1220.]I am aware that traditionally a maiden speech should avoid controversy, and, therefore, the quotation I have just read is from a speech made last week by the Under-Secretary of State for Energy. I share that view completely. For too long, United Kingdom companies have held off from investment in this area. They have been afraid perhaps that demand would not be continued. That has been my experience with the British Steel Corporation. It is a tragedy and a scandal that the pipe used in the North Sea will predominately be Japanese and Dutch.
If the Government can see a potential long-term benefit to our industry, they should give a lead. This is not a chance in a lifetime. It is a chance which the country has not had since the Industrial Revolution. It is a chance in two centuries. The British can be the Texans of the 1980s if they are capable of taking this opportunity.
There are two kinds of company which might benefit from involvement in the North Sea project. The first is the smaller, perhaps United Kingdom-based, company which needs Government encouragement and incentive to involve itself in this work. The second type is the multinational company. I congratulate the hon. Member for Coventry, South-West on her remarks. I have experience of multinational companies and do not disagree with a great deal of what she said.
The multinational company does not care which subsidiary company it puts its particular activities through. It is as happy operating through a company outside the United Kingdom as it is through a company within the United Kingdom, and it needs incentives in the same way 678 but for different reasons as United Kingdom companies. If multinational companies and United Kingdom companies can be encouraged to enter this area of activity, it will encourage industrial investment which the country needs, and it will create job opportunities.
My concern is that in the Budget Statement there is no measure, not one word, that would help the Under-Secretary of State for Energy to encourage the industrial development we need. Indeed, industrial investment and development seem to have been discouraged. I hope that it can be accepted as non-controversial when I say that budgetary steps should be taken to stimulate the development of our own oil industry. Perhaps we may hope for these steps in the next Budget from the Chancellor of the Exchequer, whoever he may be.
§ 5.50 p.m.
§ Mr. David Marquand (Ashfield)
Whatever hon. Members may think about later passages in my speech, I am sure that I shall carry the House with me in congratulating my hon. Friend the Member for Coventry, South-West (Mrs. Wise) and the hon. Member for Gosport (Mr. Viggers) on two truly excellent maiden speeches. I am always somewhat in awe of hon. Members who manage to speak without notes, but when one sees a maiden speaker without notes it is quite terrifying and intimidating, particularly if it is happening just behind one. I thought that my hon. Friend was particularly splendid in her uncontroversial passage in which she chewed up the spokesmen from the Opposition Front bench. If that is what she is like when being uncontroversial, we can look forward to splendid stuff when she is being controversial, which I hope will be often in future debates.
The hon. Member for Gosport was perhaps slightly closer to the tradition of non-controversiality. But I think that he, too, managed to insinuate some fairly deft thrusts under that witty and urbane mask at the beginning of his speech, and we hope to listen to him on many future occasions as well.
This debate is being held in the shadow of perhaps the most terrifying economic situation this country has faced, certainly since the end of the Second World War. My right hon. Friend the Chancellor of 679 the Exchequer set out the awesome experience he had when he walked into the Treasury three weeks ago, and I am sure that we all felt very much for him.
Of the dangers which my right hon. Friend outlined to us in the appalling legacy left behind by the Conservative Government, I think that we would all agree that by far the most serious is the problem of inflation. I think my right hon. Friend was right when he said that inflation at the present rate—last month at just over an annual rate of 13 per cent.—is already beginning to threaten the social cohesion of the country and that if it were to continue it would pose very serious dangers to our democratic institutions. The present level is bad enough, but the real danger is that the present level may not be held. When inflation gets to a level as high as this it carries with it the seeds of still further acceleration, and we would be deluding ourselves if we thought that the present level was likely to be held.
I think we may well see by the end of the year that the forecast of the National Institute that inflation would be between 14 and 18 per cent. may well turn out to be right. If inflation is running at about 18 per cent. by the end of the year, God knows what may happen next year. This is really by far the most serious problem that the Chancellor faces, that the Government face, that this House faces, and, indeed, that the whole British political system faces or has faced for at least 30 years.
The real test of the Government is how successful they are going to be, not in reducing the rate of inflation from the present level to a lower rate in the near future—I do not think that will be possible—but at any rate in moderating the increase which the National Institute and other commentators have foreseen. This is the context in which I should like to approach the Budget.
The question has to be looked at in two different contexts. There is first the context of the demand effect of the Budget, the Budget judgment. Secondly, and I believe more importantly, there is the context of the social implications of the Budget and its effect on the distribution of income and wealth in society. I believe my right hon. Friend was broadly 680 right on the first point. It would have been extremely irresponsible in present circumstances to have accepted the advice of those like Mr. Wynne Godley who are arguing for substantial reflation. To have added extra inflationary pressure from demand on top of the other inflationary pressures in the economy would have been an act of gross irresponsibility. I am glad that my right hon. Friend resisted those siren voices.
Massive deflation as advocated by Mr. Peter Jay in The Times the other day would also have been a mistake in present circumstances because it would have given the signal—quite apart from the effect it would have had on the British economy —to all other oil-consuming countries facing substantial balance of payments deficits to solve their balance of payments problems by competitive deflation. It would be hard to think of a better recipe for a return to the recession—indeed, the depression—of the 1930s.
My right hon. Friend was right to take a neutral course, erring slightly on the side of caution. When it comes to the effect of the Budget on the distribution of income, however, I must say candidly that I am not so sure that my right hon. Friend's judgment was right. The test that has to be applied is simple. Will the Budget facilitate the early establishment of an effective incomes policy, acceptable to the majority of trade unions and the majority of the membership of the unions? That is the test which must be passed by any counter-inflationary Budget.
I do not believe that an incomes policy provides the sole answer to domestically-generated inflation. That was the mistake made by the Conservative Party when it had its sudden and belated conversion on the road to Damascus over incomes policy. It put far too much stress on that. But although it is true that incomes policy cannot be the sole answer to domestically-generated inflation, it is also true that there is no conceivable hope of preventing inflation from getting worse without an effective incomes policy. That means that there is no hope of preventing inflation from getting worse unless the taxation policies of the Government are such that ordinary working people are prepared to accept the need for an incomes policy. It makes no difference whether that policy is called "voluntary " 681 or "statutory". It will not work unless it is accepted by the majority of people whom it affects.
They will not accept it unless they think it is fair, and in our society working people simply will not accept as fair a policy which seems to them to perpetuate an unjust distribution of income and wealth. The test of any Budget is whether it redistributes income in such a way as to make an incomes policy acceptable to the people who matter on the shop floor. My right hon. Friend has done some important things in this respect. I welcome what he has done about pensions and food subsidies. I welcome the way in which he has paid for these increases. However, I believe that the changes in direct taxation carried out by my right hon. Friend could have been more redistributive. Frankly, I am surprised that those at the higher end of the scale have not been hit harder. I thought my right hon. Friend would hit them harder. I wish he had done. I think he could have done without risk to confidence, incentives and all the other fine words used so often by Tory Members.
I am not entirely happy about the strategy for public expenditure which seems to be emerging from between the lines of my right hon. Friend's Budget speech. I was delighted to hear what he had to say about the Maplin and Concorde cuts. I was less happy to notice that he does not seem to have gone back on the cruelly regressive cuts in public expenditure announced by the right lion. Member for Altrincham and Sale (Mr. Barber) in December last during his mini-Budget. Those across-the-board, unselective and indiscriminate cuts in public expenditure made by the right hon. Gentleman were extremely abhorrent to me and to most members of the Labour Party. I hope that we will soon have from the Government a revised public expenditure White Paper setting out a very different strategy for public expenditure from that outlined by the Tory Chancellor in December. We cannot wait until next December for the next public expenditure White Paper. I should like to see one published much earlier.
I was glad to hear the announcement about the wealth tax. I accept that it would be absurd to try to bring in such a tax after only three weeks at the 682 Treasury. No one would have expected that.
I am glad that there is to be a Green Paper, and full consultation. Who will be consulted, and in what way? It would be a great pity if a Labour Chancellor were to go back on the precedent established by the Conservative Chancellor when he set up a Select Committee to examine corporation tax and the tax credit scheme. The House ought to be one of the bodies to be consulted in the preparation of a wealth tax. I hope that the Chief Secretary, who in the past was a strong advocate of more effective committee scrutiny of these matters, can give me some reassurance.
On a smaller but still important point, I was sorry that my right hon. Friend said nothing about the charge of capital gains tax on death. My hon. Friend will remember that during the brief period when I had the honour to be one of his colleagues in the Shadow Treasury team it fell to me to give an assurance that a Labour Government would introduce the death charge on capital gains tax. I hope that we can have some statement from my hon. Friend about the Government's intentions in this respect. I am sorry to be giving so many queries to my hon. Friend but I am sure that he will take them in good part. I do not think that my right hon. Friend's Budget has gone quite as far down the road to a more egalitarian distribution of income and of wealth as it could have done at this time.
§ Mr. David Waddington (Nelson and Colne)
If that is the hon. Gentleman's view, to what extent would he have increased the 98 per cent. tax at the highest level of investment income?
§ Mr. Marquand
The hon. and learned Gentleman probably did not hear what I said earlier. I certainly meant to say that on earned income the increase could have been greater. I am sorry that I did not spell it out clearly. I think that a 98 per cent. tax on unearned income is a reasonable enough rate, but I believe that the Budget could have been more redistributive as far as earned incomes are concerned.
Although the Chancellor of the Exchequer could, without damage to the economy, have gone further down the road towards greater equality than he did, 683 I still feel strongly that he has now fulfilled his side of the Government's bargain with the trade unions—the bargain that was implicit in the programme on which the Labour Party fought the General Election. I believe that it is now urgent for my right hon. Friend the Secretary of State for Employment to come to the House to explain what voluntary incomes policy machinery is to be set up and what attitude the Government will adopt to wage claims during the next few months. I believe that it is not possible to have an effective incomes policy without very much greater equality of income and of wealth than we now have. But I also believe that it is not possible to have greater equality of income and of wealth without an effective incomes policy. That part of the structure still remains to be filled in, and I believe that it is urgently necessary for the Government to do so.
§ 6.7 p.m.
§ Mr. John Pardoe (Cornwall, North)
It falls to me to congratulate two maiden speakers in this debate. The first was the hon. Lady the Member for Coventry, South-West (Mrs. Wise), who wore her colours in this House and certainly spoke within the colour of red. Having stopped the entry to this House of one prospective hon. Lady after three-and-a-half weeks of campaigning in the General Election, I am glad to have the chance to welcome another hon. Lady to the House. The hon. Member for Coventry, South-West did not seem to be too keen on some of the items in the Budget, and most of the controversy in her speech was directed at her own Labour Front Bench.
The hon. Member for Gosport (Mr. Viggers) spoke mainly about North Sea oil—and since we do not have with us any hon. Members to shout "Scottish oil", I think that on this occasion I can safely refer to it as North Sea oil. I was particularly interested in the hon. Gentleman's comments and I shall say a little more about that subject—perhaps in rather more sceptical terms than those in which the hon. Gentleman's speech was couched—later in my remarks. The hon. Gentleman said that the British could become the Texans of 1980. I do not think many of us look forward to a House full of Lyndon Johnsons and Big 684 John Connallys, but I am aware that there are people in Texas who laugh all the way to the bank with the prospect of the loot they will carry off from the North Sea. Therefore I welcomed the hon. Gentleman's comments, particularly when he said that Britain should receive a much greater share from the whole operation.
I welcomed the announcements made by the Secretary of State for Social Services, not only her announcements earlier this week but the additions which she outlined in her speech today, particularly the heating allowances and her proposals in respect of prescription charges. Although pensions are very important, as is the National Health Service and the whole attack on poverty, it would be irresponsible to allow ourselves to indulge in the luxury of dealing with those matters in isolation from our economic policy as a whole. For this reason I welcomed the comments made by the hon. Member for Ashfield (Mr. Marquand), who put these matters in the context of our economic situation—a situation that is very grave.
There were other good things in the Budget and in the recent announcements, quite apart from the matters outlined by the Secretary of State for Social Services today. The best item in this the Chancellor's first Budget was his announcement that there would be a second Budget. That at least shows that there is considerable flexibility in the Government's approach to our economic problems. I do not know whether to look forward in anguish or in hope to the second Budget, but there is certainly much that it could contain.
I also welcome the Chancellor's announcement about second homes. This is a sore point with my constituents who have seen whole villages turned into waste lands for all but three months of the year. It is a crying scandal that people should be encouraged through the tax system to own second homes. I urge the Government to go a little further. For example, could they not withdraw the residential rate relief from second homes? I believe that this must be done.
I welcomed the right hon. Gentleman's announcement about a limitation on the size of mortgages, but the idea of £25,000 mortgages does not thrill my constituents 685 and I wonder whether the Government have their priorities right. I do not know many people in my constituency who can afford mortgages of £25,000. Indeed, I do not know many people outside South-East England who can afford such mortgages. I see no reason why the tax system and the taxpayer should help to subsidise people with mortgages up to that level.
The major queries I wish to raise on the Budget, and indeed on the whole Budget strategy, spring from a quotation made by the Chancellor in his Budget speech when he quoted the National Institute's Economic Review for February. That review said of the Conservative Government's policy:It is not often that a Government finds itself confronted with the possibility of a simultaneous failure to achieve all four main policy ob iectives—of adequate economic growth, full employment, a satisfactory balance of payments, and reasonably stable prices."—[OFFICIAL REPORT, 26th March 1974; Vol. 871, c. 282.]That is not a bad starting point from which to judge the direction of the Chancellor's Budget. I imagine that he would wish us to add to that list the word "redistribution". I certainly would wish to add it as a major policy aim. Growth and full employment are essentially dependent on investment and on the level of demand.
The Chancellor of the Exchequer was fairly honest about how much growth he was expecting. He does not seem to me to be expecting very much, and I am sure there are many hon. Members who would agree that that would not be necessarily disastrous. I have never thought that the pursuit of economic growth at all costs was a pre-eminent aim of economic policy. There will, however, be rising unemployment, and there is nothing in the Budget that will stop it.
We have to ask the question: what of investment? The Chancellor was right not to add to the whole panoply of tax incentives for investment. What encourages investment is the prospect of future demand for the things that will be produced. There does not seem to be much prospect of demand, and there is not very much surplus cash available for investment, even if there were the prospect of increasing demand. Company liquidity is being squeezed dangerously by the Chancellor of the Exchequer and we must ask 686 for an early announcement to see whether public investment will take up the whole of the slack.
We are deeply concerned about housing. We have had a chronic failure over years and years to build enough houses for the people who need them. Housing is very much an aspect of poverty. We cannot tackle poverty without solving the housing problem. Unless we can show the building industry a continued and effective demand, which means a demand which can pay for the houses it builds, we shall not get the houses. There is now a serious slump in the whole building industry.
The Chancellor of the Exchequer may feel, and his advisers seem to have told him, that some of the demand in the economy as a whole can be left to come from abroad. That takes me to the other aim to which the right hon. Gentleman referred in his quotation from the National Institute—the balance of payments. Obviously no one will expect the Government to close the gap immediately. No one will wish them to change course so dramatically as to aim at that. But I hope that the right hon. Gentleman is not pinning his faith on falling commodity prices. The previous administration pinned the whole of stage 3 on the idea that commodity prices would fall. I have no doubt that they will fall some day. But he would be a fool who forecast that they will fall in the near future. If they fall, it will be because of falling world demand, and then we shall have to sell our goods in a falling world market and, in spite of the fact that we are very competitive and shall be even after this Budget, there is not much hope that we can bridge the balance of payments gap by trying to increase our share of world exports if the total of world trade is falling rapidly all round us.
It may be unfair, but I get the impression that the Government, with only three and a half weeks in office and with all the figures available to them, are waiting for something to turn up. Like the previous administration, they hope that the terms of trade will change in our favour. But what if they do not? It is distinctly possible that they will not.
As for North Sea oil, refered to by the hon. Member for Gosport, this is in danger of becoming a great national 687 myth. It is imagined by many people that we have only to sit waiting for it to come ashore and it will bail us all out. However, there is no certainty that there will continue to be a world oil shortage. What is more, it will be at least twice as expensive to get oil from the North Sea as from the major oilfields of the Middle East. We may find ourselves virtually forced to use some of the most expensive oil in the world in our own industry because of our reliance on North Sea oil. It is a very dangerous national myth.
What if the worst rather than the best predictions about North Sea oil and the world oil situation turn out to be true? Have the Government any real plans for the economy then?
Coming to what I imagine the Chancellor of the Exchequer would wish to add to the list in his quotation from the National Institute's Review—the word "redistribution"—I am amazed at the capacity of some Government supporters to suspend disbelief. I disbelieve all Governments when they talk about redistribution. So far there has been no major attempt in Britain since the last war to redistribute income and wealth. There have been lots of phoney exercises, but virtually nothing has been done to make a real attack on this problem.
We do not have a progressive tax system. I do not doubt the Government's compassion and humanity, but very real questions exist about the seriousness of their approach to poverty. The level of the old-age pension at £16 for a married couple was fixed in 1972. Then it was more than 40 per cent. of average industrial earnings. By the time that it comes in, in July, it will be 35 per cent. of average industrial earnings. What is the Government's target? What do they believe is the level for a married couple to live on as a proportion of average industrial earnings which is commensurate with a humane, civilised and compassionate society? The target must be at least half average industrial earnings. I do not suppose we can get to that immediately, but it would be helpful to have an announcement from the Government that that is what they are aiming at in the long term, by which I mean from five to seven years hence.
688 Leaving aside pensions, what of other poverty? What about family poverty—family allowances versus subsidies? The right hon. and learned Member for Surrey, East (Sir G. Howe) has already stated his view that family allowances would be preferable. I should have more sympathy with his statement if I thought that he would have spent £500 million on family allowances had his party won the last election.
I find the speed of the Chancellor of the Exchequer in increasing the child tax allowances while failing to increase family allowances a little odd. There is no doubt that people with incomes above the tax threshold will be slightly better off through the tax changes, though when the increased transport and fuel prices work through they will probably be worse off in real terms. But subsidies on food are likely to have a negligible effect when all these price increases have worked through.
To pay 90p to the first child and £1 to the second and subsequent children would cost £340 million a year, according to the Minister of State in answer to me on 18th March. That leaves us another £160 million of our £500 million to spend on food subsidies or to increase the level of family allowances for second and subsequent children.
It is those below the threshold who will be really worse off as a result of the Budget. It is they who will bear the full burden of the increases in transport and fuel prices and on the so-called luxuries of beer and tobacco. They will also have to bear the rates in very large areas of the country which will be no insignificant contribution to the inflationary spiral.
I do not believe that the Government have tackled the poverty problem as we would wish, assuming that their approach to poverty was serious. I hope that they will not shuffle off the tax credit scheme into a side alley. I hope that they will not be persuaded by the minority report of the Select Committee which the new Chief Secretary to the Treasury helped to write. I hope that the Chancellor of the Exchequer will have a careful look at the excellent article by Nicholas Barr and the hon. Member for Farnworth (Mr. Roper) in the Three Banks Review of this month in which they tear apart that minority report and say:It will be concluded that, at the very least, these charges have been overstated, and 689 that, in fact, the tax credit system can be modified so as to make the whole of our income tax and social security system more flexible in operation and a more effective device for redistributing income.The only real way to redistribute income is through a tax credit system. Any other way will end in failure.
Finally, will the Budget check inflation? It will not. It cannot. There is not one measure in it which will do anything to the chronic and dangerous inflationary spiral. The Government have left themselves without an incomes policy. Inevitably, therefore, they must adopt the monetary approach. However, they cannot adopt the monetary approach because that would increase unemployment to politically unacceptable levels. So they are settling for inflation, more inflation and inflation again. It would be possible to adopt a total subsidy policy. To do that, however, the Government would have to go very much further than the £500 million on food and the £500 million on the nationalised industries.
It might be possible to solve the problem of inflation by a massive subsidy policy, although it is by no means certain that we would come out right at the end. It is a dangerous risk in any event. The subsidies that have been announced are mere pinpricks in the problem. But inflation cannot be left to go on.
The Chancellor, in the early part of his speech, pointed out that in 1972 prices rose by 7.7p in the pound, that in 1973 they rose by 10.6p in the pound and that in the last 12 months to February they rose by 13.2p in the pound. I wonder by what percentage he expects prices to rise in the year from March 1974 to March 1975. Dare I suggest the figure of 24 per cent.? Would that be too excessive? I suspect that in March 1975, if the Chancellor is still on the Treasury Bench, he will be defending a price increase of something in excess of 20 per cent., and in that way lies total disaster.
We can, of course, live with inflation. We have made a start through threshold agreements, by tying pensions to earnings and other welfare benefits to the cost of living. But if we are to live with inflation, we had better make the decision now.
690 We must look at monetary correction, otherwise the Chancellor will put himself in the position of being the greatest swindler in the business. Indeed, as reported at col 305 of HANSARD, in his Budget Statement he spoke of new proposals for national savings. This is a fraud. This House can no longer tolerate a Chancellor of the Exchequer or a whole Government putting their names to a deliberate fraud on the British people.
I wonder whether the right hon. Gentleman in his surgeries in Leeds, if he holds them—I expect he does—would dare to advise any of his constituents to put any of their money into his new national savings certificate, the fourteenth issue, quoting a yield of 7.59 per cent. tax-free over four years, because over the last 12 months we have had an inflation rate of 13½2 per cent. Therefore, we need a tax-free yield substantially in excess of 7.59 per cent.—indeed, double that—to give any kind of return. To put £100 into any of the schemes mentioned at col. 305 is simply to pay the Government for the privilege of losing one's money. I do not believe that the Chancellor should go along with that any longer
I am sick and tired of Governments coming forward with spurious devices to persuade the British people to part with their money. I should think that War Loan is sufficient to warn any person in this country that if he lends money to any British Government ever again he is the world's greatest mug. Whatever the Chancellor may say to encourage people to put their money into his bonds, I should like it to be known that in my view no one should be encouraged to put money into any form of national savings unless they are guaranteed by monetary indexing against the rise in the cost of living.
The Government have stated that they are proposing all these measures in the Budget and the matters mentioned by the Secretary of State for Social Services to get a social compact with the trade unions. Mr. Joe Gormley, quoted in the papers this morning, has said that "no one can give guarantees about anything". He is absolutely right. No one can give guarantees. It is a delusion to suppose that the Government will get anything but a worthless bit of paper.
691 I end by quoting some remarks by Clive Jenkins, reported in The Times on 20th November 1972, about the last Government's attempt to get a bit of paper. He said:Was it wise to try and add any weight to the peculiarly English myth that men of goodwill if incarcerated together long enough can reason out solutions to the human condition which would otherwise baffle alchemists? If a group of tired tripartite-type men had emerged from 10 Downing Street, waving a piece of paper and shouting 'It's peace in our time ', would this have contributed to anything except long-term cynicism?I do not believe that the next election can be won on a piece of paper, but the Government's attempt at an incomes policy will not be any more than that.
§ 6.30 p.m.
§ Mr. Bruce George (Walsall, South)
I understand that a new Member approaches his maiden speech with apprehension, fear and, indeed, dread. I am no exception.
I represent the new constituency of Walsall, South. I pay tribute to the impartial judgment of the Boundaries Commission which made my presence here possible.
I also pay tribute to the three Members of Parliament who represented part of my new constituency: first the former Member for Walsall, North, Mr. William Wells, and secondly the former Member for Walsall, South, Sir Henry d'Avigdor-Goldsmid. The town they represented so competently for so long paid tribute to them only last week by making them freemen of the county borough of Walsall. I also compliment and pay tribute to the former right hon. Member for Wednesbury, my right hon. Friend the Member for Walsall, North (Mr. Stonehouse), who bequeathed to me from his constituency the town of Darlaston, with which I have a particular affinity and affection.
Walsall is an industrial manufacturing town north of Birmingham. I thought I should mention that, because an ex-Minister recently asked me which constituency I represented. I said "Walsall" "Yes, I know Walsall", he said; "Is not that on the mouth of the Tyne?" Indeed it is not on the mouth of the Tyne. I will not tell the House who suggested that it was on the mouth of the Tyne as it might cause him embarrassment.
692 Walsall is north of Birmingham but is far from being overshadowed by that neighbouring giant. It is a Black Country town, which is to be enlarged as a result of local government reorganisation, with a history going back to the early Middle Ages.
Walsall could not possibly be regarded as top of the beauty league. Aesthetically it is not particularly attractive. It may not be the cultural centre of the universe or the entertainment capital of the Midlands, but it is a town at the heart of the country, one of its workshops, helping to produce the wealth of the land. I refer particularly to Darlaston which epitomises the problems of our society. That town has helped to create the wealth of the nation. In wandering round Darlaston, however, one would think it was a ghost town of the pro, portions of Abilene or Wichita in the American West. As I said, it is a town which has created wealth, but there are few signs of that wealth in it.
I am pleased to speak in the Budget debate. I wholeheartedly welcome and endorse the Budget because the Chancellor, desipte our desperate economic situation, has sought to elevate a goal that I champion. He has set out to create a more just, humane, compassionate and, I hope, egalitarian society. In three weeks we have started out along that road. That goal will not be achieved by Easter, by 22nd July or, indeed, by the next Budget. But at least we have set out on that journey.
I want to devote the rest of my speech to the impact of the Budget upon the under-privileged, formerly known as the poor. They were supposed to have disappeared, but they are back—if ever they left the scene in the first place.
It is a tragedy that, after 25 years of the Welfare State and despite enormous affluence in our society, there is still far too much poverty within our society. We can study the official statistics, but these cold facts cannot hide the misery, the degradation, the frustration and the hopelessness of poverty.
Who are these people? What are the causes of poverty? I have studied a report in the Library by Rowntree written about 70 years ago. Although today's social scientists may criticise the methodology of that writer and the criteria he used 693 to measure who the poor were, nevertheless recent research has shown—this is a staggering fact—that up to 20 per cent. of the population live below, on or just above the poverty line. This is a total of 10 million people—the elderly, the homeless, the unemployed, the low paid, the disabled and the single-parent families. I read only yesterday in the Evening Standard of the plight of one Mr. Arnott struggling on his £100 a week and thinking of emigrating. The problems of this gentleman cannot be exclusively put down to the Chancellor's Budget.
There are two myths about the social services. One is that if one is prepared to work hard, one can get out of poverty. That is not always true. Indeed, quite the reverse can often be the case. With the poverty trap, one can work harder but be worse off financially, such is the situation that we have inherited. The Budget and the Government's policies so far announced clearly recognise the plight of the underprivileged. The meek and the poor may not inherit the earth, but I hope that as a result of the Budget they will get a fairer share of what this earth produces.
Our election pledge to raise pensions will be speedily honoured. One newspaper called the increases "generous". I do not like that word because it is paternalistic. What we are doing is merely recognising the rôle that the pensioners in their working lives have played in creating the wealth that we possess.
One formerly neglected section of the underprivileged are the widows. I should like to compliment the widows' organisations like the National Association of Widows and CRUSE which have articulately pursued the real grievances of widows in our society. I am delighted, as they are, at the increases in pensions and at the raising of the tax threshold, although I hope that, in the next Budget or even before, the threshold will be raised again. Widows do not want charity. Many of them do not want to exist solely on widows' pensions. They desperately want to play a part within society, and I want to see created the framework within which they call play a more dramatic and relevant rôle in our economy.
Although there are many benefits in the Budget, there are still some anomalies. 694 These include widows with difficulties in obtaining sickness or unemployment benefit, widows under the age of 40 with no dependent children, who receive no pension, widows taxed as single people regardless of their domestic responsibilities and widows who take home less pay than married women doing exactly the same job. I would make a special plea to my right hon. Friend to review the cohabitation rule which is causing a great deal of disquiet among widows. There are disturbing stories of officers of the Department of Health and Social Security exceeding what I consider to be their proper role. I hope that the Secretary of State will review this matter and make considerable improvements, because there is ample scope.
An anomaly which I hope and believe will be abolished is that of means testing. Many hon. Members on this side are appalled at the proliferation of means-tested benefits. There are over 3,000 of them and the defects are well known. They do not reach the people who should be reached. The take-up rate is abysmally low. The family income supplement, despite publicity, is taken up by only 50 per cent. of those entitled to it. There are many means-tested benefits for which the take-up rate is as low as 5 per cent. There is ignominy and stigma attached to claiming. I hope that the new Government will abandon selectivity as quickly as possible.
In the meantime, however, the benefits at present available should be publicised. I have a view, which may not be shared by some, that people have been deliberately kept in the dark about their rights in order to minimise the number of claims. I have been into Crown post offices at which the display of leaflets is derisory and have found the same situation at DHSS offices. I went into one DHSS office and asked the young man at the counter why there were not the forms available. He said "People keep taking them away". That surely is the purpose of the exercise.
If we are to have means-tested benefits, people should have at least a sporting chance of knowing what they are entitled to. I have conducted surveys of means-tested benefits. In one survey, 75 per cent. of old-age pensioners who were asked "Are you aware that you can get extra money for heating?" had no idea of 695 the existence of these allowances. Some who did said "I know, but I will not go cap in hand to the social security to get 30p." That is one example and there are many others. The man in the street would probably say that he had not heard of attendance allowances.
Disillusion with the previous system forced me to produce at great personal cost a leaflet of my own outlining the welfare benefits for old-age pensioners and giving them a sporting chance of knowing what they were entitled to. At the time I produced that leaflet, petrol rationing was a possibility. I was amazed at the speed and efficiency with which the public were informed of their entitlement to petrol coupons. Oh that the Government had devoted as much energy and attention to informing old-age pensioners of the existence of heating allowances. Which is the more important, getting me to work in Birmingham or saving an old-age pensioner from the dangers of hypothermia?
Even if people are aware of the benefits to which they are entitled, they embark on an obstacle course before they get them, niggardly though they may be. They go to the social security office and may be turned down. If they have the gall to take the matter further, this involves a tribunal. None but the hardy is prepared to last out the course. So let us abolish means-tested benefits.
In the meantime, let us conduct an active campaign on television, by leaflets and in the Press. We could even do as Manchester has done—I commend this—and appoint welfare rights officers whose sole job is to increase the take-up of means-tested benefits.
I thank you, Mr. Speaker, for giving me the opportunity of speaking at such an early stage of this Parliament. I have fulfilled my side of the social contract by not being too controversial. I am glad that Tory Members have fulfilled their side by not interrupting. This is a Budget that I endorse, one which I hope, despite the protestations of the hon. Member for Cornwall, North (Mr. Pardoe), will achieve its objectives. I look forward with eager anticipation to the next instalment.
§ 6.43 p.m.
§ Mr. Percy Grieve (Solihull)
It is my happy duty to congratulate the hon. 696 Member for Walsall, South (Mr. George) on an amusing and felicitous maiden speech and one which was spoken from his experience and from his heart. This House will always listen with attention to those who speak from their hearts and from their experience. With one thing that the hon. Member said I was in profound agreement. I speak as one born the son of a widow, and I share the concern that the hon. Member expressed for widows and his pleasure at the ways in which their lot in life can be made better.
In the great need of this country today, in the appalling economic crisis through which we are going, the Budget fails the nation. Not only does it not encourage the qualities of thrift and saving and the virtue and fact of investment which is necessary to put the country on its feet; it positively and deliberately discourages those qualities.
The Budget does that by a bludgeon which is used in many ways against industry, which is already reeling under the effects of the three-day working week and bad profits and which will be hard pressed as a result of the crisis of the winter. It does so by seeking to milk industry of every available liquid resource. It puts up corporation tax and it looks to industry for an advanced payment of its future instalments of corporation tax. It looks to industry to finance in large measure the increase in social security benefits. Proof of the effect of a Budget of this kind upon the confidence of the investor can be seen by what has happened on the Stock Exchange in the last few days. The point was reached this afternoon when the Financial Timesindex was down to 271.7, less than half the figure at which it stood in May 1972.
The Financial Secretary smiles at what I say, and that is a danger. The Labour Party is so obsessed with the evils, as it chooses to regard them, of profit that it fails to see that depriving the ordinary man of the incentive to save, depriving the investor of the incentive to invest and depriving industry of liquidity is to pave the way for the greatest slump since 1929. As if that were not enough, the Chancellor has even doubled the stamp duty. [Interruption.] Again we have guffaws from the Government benches and from the Financial Secretary. He does not apparently appreciate that 697 Britain's stamp duty arrangements are unique, that one of our sources of finance is investment from abroad and that this will be a grave disincentive, as anyone who knows the City can say, to the investment of money in Britain. The country will suffer from these appalling defects in the Budget for a long time to come. It will certainly suffer until the Government and the Chancellor have a change of heart or until they are replaced, as I hope they soon will be.
My right hon. Friend the Leader of the Opposition pointed out on Tuesday examples of spitefulness and meanness in the Budget. First, there is the attack on old people living on invested savings. Many of my constituents have served the country well, have sold their businesses and have put their money by, hoping to live in modest comfort on the proceeds. Those people will now be made subject to the 10 per cent. surcharge. My right hon. Friend the Member for Altrincham and Sale (Mr. Barber) sought to treat the first band of investment income—up to £2,000—in the same way as earned income.
The second example is the attack on the young executive, upon whose energies the country depends to a great extent for its prosperity. These people are suffering acutely from the mortgage situation and they, too, will bear the brunt—as the least able to do so among the better-off—of the tax increases. In my constituency these people have received a body blow from the Government through the increase in the rates. Solihull has lost £1.5 million under the reorganisation of the rating system. That means that the rates there will increase by 92 per cent., which is one of the steepest rises in the country. It ill became right hon. Members on the Government side to complain in the recent election about high mortgage interest rates since they are now seeking to punish the people who have to pay those rates.
Another aspect concerns the treatment of the investment income of children. The Secretary of State for Social Services this afternoon protested her concern for children. No doubt she is concerned for children when they are cared for by the State. However, when the care comes in the form of a legacy from a godmother, however modest the income of the child 698 or the parent, both are to be punished by having their incomes aggregated. Comparatively few people are in that situation and I expect that the Government feel they can get away with it unnoticed because it does not affect many potential votes. However this is a act of unparalleled meanness which is devoid of all principle.
When last in power the Labour Government said that they were treating the family as a unit. But they treated the family as a unit not for purposes of earned income but only for investment income. This strange tribal conception is unique in the world. We all know that it is done to punish those who have incurred the displeasure of the Labour Party by their impertinence in having means of their own.
§ Mr. Peter Hordern (Horsham and Crawley)
Does my hon. and learned Friend agree that, in view of this catalogue of the extra taxation and burdens which have been placed upon the elderly and those who save, it ill becomes Government Members to behave in this way, particularly the Financial Secretary, who has done nothing but snigger during this recital and who has himself received an increase in salary of £2,000 a year as a result of one of the first actions of the Labour Government?
§ Mr. Grieve
I agree with my hon. Friend. There is no principle whatever in treating children in the way I have described. It is grossly unfair and is an example not of politics or a philosophy of social justice but of envy and meanness.
I reserve my judgment on the wealth and gift taxes until I know what they are all about. However, by producing the threat of such a tax without adumbrating in any way how it will operate the Chancellor has done one more disservice to investors. No doubt that is something for which we shall pay. If the wealth and gift taxes are to be genuine fiscal measures, if as a result of the gift tax the level of death duties can be reduced, and if as a result of the wealth tax income tax can be reduced, no doubt they will receive a qualified welcome. If, however, as was indicated by the Chancellor during his election campaign, the purpose is to make the so-called rich howl, if it is to be a 699 policy of simply expropriating private property, this too will be a policy not of justice but of envy and meanness. I trust that in those circumstances my hon. Friends, and perhaps even hon. Members on the Government side, will oppose it.
§ 6.55 p.m.
§ Mr. Denzil Davies (Llanelli)
The hon. and learned Member for Solihull (Mr. Grieve) made an extraordinary speech. One would not have thought that he had been a Member of the party which had formed the Government of the past three and a half years—a Government who have bequeathed to us one of the gravest financial and economic crises which this country has faced for a long time. If his Government had not been in office we would not have had a balance of payments deficit of—quite apart from the oil problem—£2,000 million. His Government also presided over inflation now running at 15 per cent.
Perhaps the hon. and learned Member would care to explain to his elderly constituents, who he says are suffering, that the main cause of their suffering has been the inflation brought about by his right hon. and hon. Friends' fiscal and monetary policies when they were in government. Perhaps he would also care to explain to young people paying huge interest rates on mortgages that this is largely due to the disastrous decisions of his right hon. Friend the Member for Altrincham and Sale (Mr. Barber) as Chancellor of the Exchequer during the past three and a half years.
Listening to Opposition Members one would have thought that my right hon. Friend the Chancellor of the Exchequer had been Chancellor for a long time, whereas he has been in office only three weeks. [Hon. Members: "Too long".] He has inherited a considerable financial and economic problem. A period of humility, if not of silence, would have been more in order from the Opposition, considering the state in which they left the country.
I congratulate my right hon. Friend the Chancellor on producing in a short time a Budget which most people would regard as fair and which goes some way towards creating that just society without which we shall be unable to solve the country's problems.
700 I therefore hope that my colleagues on the Treasury Bench will not think it amiss if I make a few reservations on some of the matters in the Budget, and I hope that they will not believe that I am unmindful of the difficulties they have faced. A major problem facing the country is inflation. Another is the distribution of wealth. There are still vast concentrations of wealth in the hands of a few people. These are two of the major problems. Inflation is the more immediate problem, but there is also the concentration of wealth in our society.
I believe that the running of a Budget deficit—we have been running large deficits recently—contributes to inflation and that reducing the deficit can, to some extent, reduce inflation. It seems that a Labour Chancellor of the Exchequer is in the not too unhappy position of being able to reduce the borrowing requirement and, at the same time, to take action towards breaking up large concentrations of wealth which still exist in this country. My right hon. Friend has made a start. He has been able to reduce the borrowing requirement by about £700 million. That is not a particularly large figure and we still have a long way to go, but no doubt further steps will be taken to reduce the requirement further.
I am somewhat disturbed that my right hon. Friend has taken only £250 million of the reduction for the year 1974–75 from increases in direct taxation. I understand the difficulties of raising vast sums of money at the higher rates of income tax, but I feel that in this respect more could have been done. For instance, a married man with two small children, fortunate enough to earn £10,000 a year, will, following the Budget changes, be worse off in terms of direct taxation to the extent of about £180 a year—not a vast sum for a man earning £10.000. I do not advocate taxing people for the sake of taxing them, but a man in the position I have described will probably consider that he has come off fairly lightly under the Budget changes.
There was an intervention regarding the 98 per cent. top rate of tax on investment income, but I believe that there are few people receiving investment income at such a level as to attract that rate of tax, and the point made about it is not particularly relevant. The 701 higher income groups have come out of the Budget in not too bad a shape.
I wish that my right hon. Friend could have increased direct taxation a little more than he did—£250 million in 1974–75.
We are facing a grave financial crisis. The only way to solve it is by reducing the borrowing requirement and, thereby, the rate of inflation.
I also take issue with the Treasury Bench on the subject of child allowances. The cost of increasing these allowances will be about £165 million in a full year. The richer taxpayer benefits more from an increase in allowances than does the poorer taxpayer. A man with a tax rate of 60 per cent. gets more benefit from an increase in child allowances than a man with a tax rate of 30 per cent. A person who pays no tax gets no benefit from an increase in child allowances. The money could have been better spent in increasing family allowances, which cost in a full year, I understand, between £340 million and £350 million. But the £165 million now coming back in increased child allowances could have been better utilised to give an increase, admittedly not a large one, in family allowances. The higher tax a person pays the more allowances he claws back.
I welcome the changes in indirect taxation as being the fairest way of raising more revenue from that source. I have, however, two reservations about this. First, I was sorry that I heard nothing from my right hon. Friend about the possibility of increasing the rate of VAT on certain goods which might be called luxuries. He could have introduced a higher VAT rate for those goods which fell into the top rate under the old purchase tax system. A higher rate on such goods at a time of grave national crisis could have been a way of raising extra revenue without hurting people at the lower end of the income scale.
I also take issue over the proposal for VAT on petrol. I understand why my right hon. Friend took this action, but a fairer system would have been a differential licensing scheme for motor cars, based on cubic capacity. A figure of, say, 1,800 cc could have been chosen on which to base a differential licensing scheme. Many people in country areas, as well as in industrial constituencies, have to use 702 cars to get to work because there is no public transport. Others who work on shifts cannot depend on public transport and have to use their cars. It would have been fairer to impose a tax on those who can afford to buy and run larger cars, without penalising those who drive smaller vehicles and have to use them to get to work.
I welcome my right hon. Friend's announcement that he will introduce a gift tax. We are one of the few countries in the Western world without a comprehensive gift tax.
I am glad that my right hon. Friend also said that he would not introduce a wealth tax now but would produce a Green Paper. I am possibly in a minority on the Government benches in not believing, although I may be convinced later, that a comprehensive wealth tax will necessarily achieve the objects we on this side of the House want to achieve. There are considerable problems in extending a wealth tax over the whole range of assets, because there are difficulties with valuation and exemptions.
But I am disappointed that the Inland Revenue was unable, it seems, to advise my right hon. Friend that it would be possible in the Finance Bill to introduce a simple capital levy on certain accumulations and aggregations of wealth. For instance, a vast amount of money is tied up in trusts and settlements, much of it accumulated from generation to generation. It would have been simple to impose a kind of capital levy on the asset value of all trusts and settlements. That was done under the 1965 Finance Act in relation to capital gains tax. It would not have been administratively difficult, and I am disappointed that my right hon. Friend did not introduce it.
Such a levy could have been extended to property companies. Over the past few years the property investment company has benefited enormously from inflation. It has not sold its properties, it has not turned them over, but has merely used the increased value of its assets to borrow more money. A capital levy on the assets of a property investment company could have raised a great deal of money and gone some way towards achieving our purpose. If later we wanted a wealth tax, we could have dovetailed such a levy into the legislation on that tax.
703 By announcing a gift tax, my right hon. Friend has made it expensive to avoid estate duty. But someone could have remembered that over the past two years the previous Chancellor had benefited those paying estate duty to the tune of £150 million. That is the size of the concession made by the changes in estate duty of the past two years. I believe that in our present economic situation a way could have been found to take back the £150 million. By adopting these measures my right hon. Friend could possibly have raised another £500 million, not for the sake of raising money from people but for the sake of reducing the borrowing requirement by another £500 million.
My right hon. Friend inherited not only an appalling internal situation but one of the worst balance of payments situations in our history. The underlying deficit is probably £2,000 million and the oil deficit £2,000 million, making about £4,000 million. Therefore, I was somewhat disappointed to hear my right hon. Friend say that the deficit should be covered by direct monetary inflows.
I hope that my right hon. Friend has not fallen into the hands of those false prophets who believe that the balance of payments problem can be solved by borrowing and not by other means. It may be my puritanical, Nonconformist background, but I do not believe that we can solve our balance of payments and inflationary problems by borrowing vast sums in foreign money markets and from international institutions.
I am not saying that we could or should eschew all forms of borrowing. But we are now running a deficit of about £4,000 million and in the past three weeks we have borrowed about £4,000 million. That takes us on for one year. What about next year and the year after? We cannot go on borrowing every year to try to solve our deficit problem.
If my right hon. Friend was unable to introduce a form of direct controls over imports, will he consider introducing a form of import deposit system, which worked so well under the last Labour administration?
The balance of payments problem and the deficit in our borrowing requirement I believe to be at the heart of our 704 inflationary troubles. If those matters are not dealt with, the crunch, when it comes, will be even worse, and the problem will take longer to solve.
My right hon. Friend has made a start. I hope, and know, that in the autumn he will take further steps which will reduce inflation, increase the distribution of wealth and put the country back on a firm financial and economic basis.
§ 7.10 p.m.
§ Mr. John Stanley (Tonbridge and Malling)
One of the problems about finding one's way around the new constituency which I represent is that virtually none of the places is pronounced as it is spelt. I should be representing the new constituency of Tonbridge and Malling. In fact, I am proud and privileged to represent the constituency pronounced "Ton-bridge and Mauling". We have within our constituency delightful places such as Ightham, pronounced "Item", Wrotham, pronounced "Rootam", and Trottiscliffe, pronounced by some quirk "Trossley" I await with interest seeing how the reporters of the OFFICIAL REPORT manage to reproduce that passage. I convey my apologies to them in their place up aloft.
I also apologise to my predecessors in the constituency for the dismemberment of their previous constituencies by the Boundary Commission to bring my own into being. My constituency represents what was formerly the right-hand side of the constituency of my hon. Friend the Member for Sevenoaks (Sir J. Rodgers) united with the head and shoulders of the constituency of the former hon. Member for Tonbridge, Mr. Richard Hornby, now regrettably retired from the House. I take this opportunity of thanking my two predecessors in my new constituency for the exemplary service they have provided for my constituents over many years.
My constituents waited with great expectation for a passage in the Budget speech which never came. They were waiting in particular for the Chancellor's statement on the Channel Tunnel project. Regrettably, he chose to leave it to the Secretary of State for the Environment.
My constituents are deeply apprehensive about the project, with every good reason. We lie athwart the route of both the high-speed main railway line to the proposed Channel Tunnel terminal 705 entrance and the main motorway to the terminal area.
I hope the Secretary of State for the Environment will bear in mind at least the following three matters before making his statement. I hope he will bear in mind, first, the total inadequacy and insensitivity of the supposed consultations which are taking place between British Rail and the local authorities about the route of the high-speed line. All that British Rail has done so far is to publish a large map showing a big black line running right across a large segment of the Kent countryside and going through a number of Kentish towns.
I shall hold up a copy of the map for the benefit of the Minister. If he could see it more closely he would see the line streaking—if I may use that word in a decorous sense any longer—through the town of Tonbridge. Underneath this thick black line there are many houses, not least in the town of Tonbridge itself. British Rail has been totally uninformative about its plans for the houses underneath the black line. I hope that the Secretary of State for the Environment will press on British Rail the need, as a matter of great urgency, to clarify what the line means in terms of housing loss along the line of the route.
Secondly, most of us in Kent are far from convinced about the need to incorporate a vehicle ferry service into the Channel Tunnel project. We are largely hostile in particular to the provision that there should be a lorry ferry service. That service will provide less than one-fifth of the revenue of the Channel Tunnel but will produce a substantial increase in lorry traffic passing through the county. We in Kent are deeply sceptical about the proposal, and in my constituency we are very hostile to the incorporation of any form of lorry ferry service, in particular, into the project.
I should be grateful if the Financial Secretary would pass the third point on to his right hon. Friend the Secretary of State for Social Services, as it originates with her. When the right hon. Lady was in a previous incarnation as the Minister of Transport—of which we all have vivid memories—she undertook to the road haulage interests that the Channel Tunnel would be operated on the basis that there would be no discrimination between road 706 and rail, and that provision has been incorporated into a treaty concluded between the British and French Governments. I hope that the Government, in reviewing the project, will also review the treaty and that provision in it, because most of us in Kent believe that there should be positive discrimination in the operation of the tunnel facility—if it is ever built—in favour of rail, particularly where freight is concerned.
I now turn to less parochial features of the Budget. The Chancellor has said that he will concentrate above all else on protecting the most vulnerable. I am sure that that is an objective with which we would all be in sympathy and would all applaud. The right hon. Gentleman has identified three priorities—food, housing and pensions. Indeed, he has provided armour for the British people in these three areas. He has asked the British people to nut on the helmet of higher pensions, admittedly strapped with higher national insurance contributions; to put on the breastplate of empty speculatively built houses to be purchased by local authorities; and to take up the shield of food subsidies, which predominantly, appear to be represented by a penny off the "pinta".
The House wishes to see how pertinent is the armoury that has been provided. Let me consider pensions first. Both sides of the House welcome the announcement to increase the level of pensions for existing pensioners. I hope that we are moving rapidly towards a situation—it has already been reached in the care of the handicapped—in which pensions move out of politics—except perhaps at election time. I am sure that there will be no suggestions or symptoms of sour grapes from the Opposition that the pension increase will operate two months before we should have made an increase. Equally I am sure that the Government will not be self-righteous about the fact that they have increased pensions now, particularly as their record when previously in Government was outstripped by that of the Conservative administration.
The truth is that successive Governments, of whichever party, have continuously been improving on previous records. As the previous administration improved on the record of the preceding Labour administration, so no doubt the 707 Government will make a further improvement, and we ourselves will shortly be making an even further improvement on what they do.
We have in the post-war period made a steady advance in pension provision. Two major legislative landmarks have been made. The first was the National Insurance Act 1946, which made vast social advances by making pensions available for those at or near retirement age. The second, and equally important, was the Social Security Act 1973, which, for the first time, established on a sound, stable financial footing the provision of pensions for those working now.
I am disappointed in the extreme to hear the right hon. Lady say that she is contemplating a partial unscrambling of the Social Security Act with the appearance of a White Paper, because the 1973 Act is of great social worth. If there is any attempt by the Government to go back to the type of legislation envisaged by Mr. Crossman when he was Secretary of State for Social Services I am sure that it will be bitterly resented by millions of those who have accumulated pension rights, and particularly by millions of trade unionists and others who benefit from occupational pension schemes.
In housing, I confess to being struck with some wonder by the Chancellor's appearance as the fairy godmother of the speculative builders. That is what I suggest is represented by his proposal to make available an extra £200 million that will enable local authorities to buy speculatively-built homes that cannot immediately be sold. I wonder whether the implications of that policy have been fully thought through. Has it been considered whether it is equitable that the speculative house-building industry, having enjoyed substantial profits in 1972 and 1973 and now facing a somewhat leaner time this year, should rather than accept that, have the possibility of being bailed out at the taxpayers' expense?
Has it been thought through whether it is desirable to encourage developers to be put in a position in which, when they have completed a development, rather than try to sell those houses on the open market in the normal way, they will first see whether the soft option of 708 selling to a local authority and retaining their profit margin is open to them. I think this proposal will produce a major reluctance on the part of big developers particularly to set about selling their houses to those young couples who want them
Thirdly, I wonder whether this same £200 million might not be better spent by investing it in the building society movement or by making it available in the form of local authority mortgages to enable young people to buy these houses, which, of course, is the very purpose for which they were first built.
We have two basic housing problems. We have the problem of providing houses for rent, for those who are homeless or for those who have not got the financial option of buying. We also have the second problem, which is the provision of houses for the great majority of young people who are trying to buy their own houses and whose ambition is to buy rather than to rent. I fear that in the Chancellor's housing statement in the Budget he has addressed himself exclusively to the first problem and ignored the second.
Finally, I come to the question of food, and I have to confess to the same degree of wonderment about that as in the matter of housing. I do not want to be drawn on to whether the Chancellor's decision to make £500 million available for food subsidies is right in principle, because one's maiden speech is supposed to be non-controversial, and I trust that I have been moderately non-controversial so far, but if £500 million is to be made available I wonder whether making it available for food subsidies—in particular, the enormous subsidy for milk—is the best way to advance the cause of the most vulnerable.
My right hon. Friend the Member for Sidcup (Mr. Heath) estimated that the cost of the milk subsidy would be £310 million, which is over 60 per cent. of the total amount of food subsidies to be made available. I understand that figure is made up of £130 million—the subsidy involved in reducing the "pinta" by a penny—plus the £180 million which would be necessary just to maintain milk at its present price.
If one went into the streets and found six people in the category that we are 709 talking about amongst the most vulnerable, I wonder whether, if they were given an option of stating which items they would like to see reduced in the household budget, they would choose milk. I suggest they would choose rates or rents or electricity or coal or fares or meat products such as sausages, bacon or joints. Those, I suggest, are of far greater concern to the people whom the Government are trying to help. I do not think that milk would feature in the first 10 items that people would wish to have reduced. This is an extremely expensive subsidy, and it is wholly indiscriminate. I wonder whether it is right that every Member of this House should now be having a subsidy on his pint of milk.
Hon. Members opposite in their budgets have tended to produce a conjunction of three circumstances: first, higher taxation leading to a reduction in net earnings; secondly, inevitably as a result of that, they have produced restrictions of choice. In previous Budgets they have usually managed to combine those two unsatisfactory features with keeping down key and necessary items in the household budget. In this Budget they have not merely restricted people's net earnings and restricted their choice. At the same time they have managed to ensure major increases in a number of key items in the household budget. This is a unique and unhappy recipe for any budget. The dish that has been concocted —although satisfactory for one group namely, the pensioners—will not be satisfactory for the great bulk of the British people the longer they have to digest it.
§ 7.25 p.m.
§ Mr. George Gardiner (Reigate)
It is with particular pleasure that I follow my hon. Friend the Member for Ton-bridge and Mailing (Mr. Stanley). It is clear from his speech that many of the problems that afflict his own constituents in Kent are those which are felt in my part of Surrey.
I should start my first speech to this House by explaining that the seat I represent is rather different from that which bore the same name in the last Parliament. The new Reigate constituency is made up of two parts. One is the old borough of Reigate, previously represented by my right hon. and learned Friend the Member for Surrey. East (Sir 710 G. Howe), and the other part is the old urban district of Banstead, which was part of the former Carshalton constituency, represented by Captain Walter Elliot. I take this opportunity to pay tribute to Captain Elliot. The House will be well aware of his distinguished service to it, notably on the Chairmen's Panel. I might add that he served his constituents every bit as well as he served Parliament.
My constituency, like many others and like that of my hon. Friend the Member for Tonbridge and Malling, is deeply concerned about the problems of modern transport and their impact on the environment. At this moment no fewer than two motorways are being carved through my constituency at considerable environmental cost.
However, the main local anxiety concerns air transport, because we lie just to the north of Gatwick. Frankly, we are amazed how many people cheerfully contemplate scrapping Maplin on environmental grounds, yet are prepared to accept the desecration of the Surrey green belt that would result from expanding Gatwick. The fear is not so much of aircraft noise—quieter aircraft may take care of that—as of the consequent expansion of road and rail communications to the airport, the increased population required to service it, and the safety risk from heavier air traffic over residential areas.
After my constituency, I should like to mention an institution here in the Palace of Westminster, to which I owe a great deal; namely, the Parliamentary Press Gallery and the corps of Lobby correspondents within it. I do not know whether I am the first Lobby correspondent serving daily newspapers to fall from grace from the Press Gallery straight on to the Floor of the House, but I am certainly the first to do so for many years. There is a healthy love-hate relationship here between the Press and politicians, but, of course, we co-habit the same building. In making this move I feel that I have simply rolled over to the other side of the bed.
So I join many Members of this House who are deeply aware of the contribution which the Press Gallery and its members play in the corporate life of Parliament. We recognise that they are almost as much political animals as we are. After 711 all, if they were not, they would never work the hours here that they do. Whereas on some occasions we are able to slip away by pairing, there is no such thing as pairing in the Press Gallery.
From the Gallery one has watched many Budgets presented. One of the first I witnessed, Mr. Speaker, was your own so-called "lollipop Budget", which one might call "lollipop mark I". I witnessed many others, too. So it was with some excitement this year that one awaited what was built up as the "Robin Hood Budget"—taking from the rich and giving to the poor. Having heard it, I must say that the standards of marksmanship in Sherwood Forest are not what they were. Far from picking off the Sheriff of Nottingham, the Chancellor is reaching into the pockets of his retinue and foot servants. Little of the extra tax revenue in this Budget is being taken from the wealthy. Instead, as we always warned, the middle income earners will have to pay up, and, through indirect taxation, so will many ordinary working men and women.
I fear that the Chancellor's measures will have a very critical reception from income earners such as those who live in my constituency and many other parts of the South-East. In my years of serving regional newspapers here I have become keenly aware of the feeling of those in the regions—as expressed by their Members of Parliament—that they were not getting a fair share of new industrial and office development.
That is a sentiment with which I have great sympathy. But I ask the House to recognise that there are many people living in the South-East today who now feel that they are being made to carry an unfair burden. They earn salaries which would be regarded in other parts of the country as extremely good. But they live in a region of very high living costs, particularly for housing. To reach their place of work they have to buy season tickets which are constantly jumping in price. In Reigate, as in other parts of this region, there are families earning £3,500 to £4,000 per year who find it increasingly hard to afford an annual holiday. They are not the wealthy whom the Labour Party promised to tax in its election manifesto. Yet under 712 this Budget they are being taxed as though they were.
Why have those people, whose taxable income falls between £4,500 and £5,000, been singled out for such heavy punishment? If they live in the South-East they cannot be called wealthy either. But now all these people find the burden of tax increases put upon them, plus higher pension contributions, plus 12½ per cent. on their season tickets to commute to work.
Though rents have been frozen, absolutely nothing has been done to stop mortgage interest rates rising still further. We gather that the Secretary of State for the Environment and the building societies are to have urgent talks about this problem. They had better come up with something, for, if mortgage rates go up to 13 per cent. as threatened, many families who have bought a home in the South-East over the past two years will no longer be able to afford it; yet they cannot sell their home and move elsewhere because they will not be able to recover a price comparable to that which they paid two years ago.
If that happens, Ministers will find that they are bankrupting not only firms but families too. If those owing their own homes are made to pay increased taxes and rates so that rents can be subsidised, while nothing is done to avert 13 per cent. mortgage interest rates, it will be the most unjust and discriminatory housing policy that has ever been operated.
These people in the professions, in middle management and in commerce are the very people whom we should be encouraging if our economy is to thrive. Instead, they are being squeezed into becoming a new category of poor. Many of them would be prepared to pay higher taxes for a genuine social purpose—to help those really in need or, for example, to provide the invalid cars we read of this week in the Sharp Report. But it will not wash to tell them now that they are being taxed to help the pensioners, for the bulk of that is being paid for from contributions. They know that two-thirds of the revenue from higher income tax this year is to go in food subsidies, across-the-board payments regardless of need, with no real social impact, making only a marginal difference to the average family's shopping bill.
713 Budget Statements are, of course, big Parliamentary occasions, but sometimes I think that we do not treat them as big enough. We look over our shoulders for overseas confidence, and I certainly hope that the Chancellor of the Exchequer continues to receive it. But a Budget should also engender confidence among our own people in their future. I must take issue, therefore, with those hon. Members on the Government benches, and with some on my own, who have poured scorn on the idea of making economic growth a prime objective of national policy.
My hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen), in a most eloquent maiden speech, last night claimed that what the people of this country were voting against in 1970 and again in 1974 was inflation above all else. With great respect, I do not think that that is entirely true. I share the utter abhorrence of inflation felt by the hon. Member and, I am sure, by other hon. Members. I agree that a major test of this Budget is what it does to tackle it. At the same time, we must recognise that those living and working in a modern industrial society have a right to expect that society to produce improvements in their standards of living, in social provision for those in need and in the environment. Those improvements can come only from economic growth.
I do not believe that the electors have simply been turning on successive Governments and saying "Do nothing else but beat inflation". I think that the people expect political leaders to make possible the fruits of a modern industrial society, including an acceptable level of employment without stimulating dangerous inflation in the process.
I am convinced that much of the bitterness that we have witnessed in industrial relations in recent years springs directly from Britain's persistently low rate of growth since the last war. If we do not get a higher growth rate, I fear that industrial and social resentment will become increasingly deep and bitter. If this Budget fails to lay the basis for that growth by encouraging investment and instead fosters the notion that we can jog along on the kind of economic performance that we have averaged since the war, I believe that the Chancellor 714 will have failed the British people in their greatest need.
§ 7.37 p.m.
§ Mr. J. M. Craigen (Glasgow, Maryhill)
I have the privilege of representing the new Maryhill constituency. At the last General Election Glasgow lost two seats as a result of overspill during the past few years, and all of the former Maryhill constituency is now represented in the new constituency. The former constituency was represented ably, diligently and conscientiously for nearly 30 years by Mr. William Hannan. I was not long in the House before I appreciated just how highly respected Mr. Hannan was among hon. Members and House officials.
This Budget is broadly acceptable to my constituents because we are realistic people. We realised that, whatever Budget was produced, it would be a harsh one. We are in a difficult economic situation. But my constituents consider that it is a fair Budget, too, because it tries to tackle some of the social injustices from which we have been suffering for many years.
I want to deal in a little depth with three main topics. In the election all political parties made great play of the plight of pensioners. Maryhill probably has a slightly higher than average proportion of pensioners. I therefore welcome the Government's firm commitment to raise pensions to the levels announced in my right hon. Friend the Chancellor's speech and the speed with which the increases are to come into effect. I welcome the increases in the age exemption limits and I am sure that they will be acceptable to many working pensioners.
We on the Government side have prided ourselves on the social contract that we have been able to achieve with the trade union movement. I believe, however, that we need something like a social contract for pensioners, because the problems do not relate simply to money matters for pensioners. Pensioners are concerned with many social problems, not least housing.
In welcoming the Chancellor's promise to stimulate house building, I hope that the Government will give increased attention to the need to provide additional accommodation for old people. I am constantly coming up against the problem of 715 old people in properties totally inadequate in both condition and size. In the private sector one of our problems in Glasgow is that many properties are 75 to 100 years old and are in need of demolition. Even in the public sector there is the problem that the children of the family have left home and the old people are left on their own in over-sized accommodation.
I should like to say something about the position of young people in our society, particularly unemployed young people. Little was said about them in the General Election campaign. In my constituency many young people leave school with little or no hope of employment or have to take jobs not suitable for their long-term career prospects. Indeed, they do not consider the question of a career. For them it is enough just to find a job. We are spending millions of pounds on education and raising the expectations of young people, and at the end of the day they have no jobs to go to.
We should take very seriously the point made by my right hon. Friend the Chancellor of the Exchequer about the need to use our manpower—and womanpower —more professionally than in the past. Many hon. Members are accountants or are in the world of finance. The rewards and social standing of people in finance have always seemed to me to be unduly high as against the rewards in personnel management or for those engaged in full-time trade union work who are dealing essentially with people. We must take a fresh look at the social balance sheet and decide what matters most. Is it money or is it the people who make up a factory at management and shop floor levels?
Scotland will welcome the Chancellor's intention to continue the regional employment premium beyond September 1974. I should like to think that the Government might extend REP to the public sector. When I look at Scottish industry, it seems that most of the new employment opportunities will have to be provided within the public sector. Only the other day on the Adjournment the House debated the closure of the Scottish Daily Express in the private sector. When I consider Scotland's future, I think that the new employment opportunities will have to come increasingly from public sector investment.
716 I hope that the Government will initiate an inquiry into the social costs of centralisation in Britain. The hon. Member for Reigate (Mr. Gardiner) dealt at some length with the problems facing people in the South-East. If I may say so, as a visitor to the South-East I readily recognise the difficulties facing people here—high land prices, the problem of finding accommodation, of finding people to work in the social services and so on.
I am concerned also at the demands for increased London weighting. It highlights the problem of centralisation. In the United Kingdom, and in some countries within the European Economic Community, the trend towards centralisation probably has a high inflationary influence. In other words, it helps to push up the cost of living. I should welcome an inquiry into the social costs of centralisation in the United Kingdom.
We have had 40 years of regional policies in Britain. Originally we called it help to the distressed areas. Now we call them development areas. Essentially, however, it has always been ambulance work to bail out the areas where opportunities were limited and which people were having to leave in search of opportunity elsewhere.
I for one welcome the Government's intention not to spend another penny on the Maplin development. I hope that the Channel Tunnel also will prove a nonstarter. Commitment to those two projects would be like adding petrol to the flames of centralisation. I hope that the Government will take a firm line on the problems of the South-East.
I should have welcomed a firmer statement from the Chancellor of the Exchequer about his intentions regarding revenues from North Sea oil. I recognise the difficulties under which he was labouring. Indeed, one has to acknowledge the way in which he overcame those difficulties within three weeks in presenting us with the Budget this week. I look forward to hearing the Government's intentions regarding those oil revenues.
The Budget is an indication of a beginning towards social fairness in Britain. I hope that it will also be a start towards a better distribution of wealth and opportunity within the United Kingdom as a whole, because that can only help areas 717 such as Glasgow and constituencies such as mine.
§ 7.49 p.m.
§ Mr. Peter Hordern (Horsham and Crawley)
I am honoured to follow my hon. Friend the Member for Reigate (Mr. Gardiner) and the lion. Member for Glasgow, Maryhill (Mr. Craigen) at the conclusion of their most successful maiden speeches. The House has listened to them with considerable attention and real pleasure. I know that their constituents will appreciate the remarks they have made in the House today and will feel, quite rightly, that they have in my hon. Friend and the hon. Gentleman real champions for their constituencies. They have every reason to be proud of them and of their remarks.
I hope my hon. Friend will allow me to say that his remarks about Maplin pleased me considerably as I am a political neighbour. Equally, I hope that the hon. Member for Maryhill, who is against Maplin, will forgive me if I oppose his remarks.
My hon. Friend strayed in his uncontroversial remarks on to some points about the economy, and I did not agree with some of them. Nobody envies the Chancellor of the Exchequer his task. The objective of dealing with inflation is common to most European countries and remains, so far as one can judge, the main preoccupation of all Western European countries and their people. I guess that it is far more a primary cause of concern than other attractive objects of policy such as growth.
In Italy one sees Italians leaving the country, their suitcases bulging with lira. In West Germany the rate of inflation is proceeding to 10 per cent. and in France to 14 per cent. annually. It is no wonder that in this country the control of inflation is our primary concern.
During the election, members of the Labour Party said that if they became the Government they would be able to mitigate the problem of inflation to a large degree by food subsidies. They also suggested that the cost of those subsidies could be obtained from the rich. The expression used by the Chancellor was that the rich would be "howling with anguish". I have not heard any howls of anguish from the rich so far, though I 718 dare say they will come. Everyone will observe that this is the most expensive Budget for every family in the land. No family will not soon feel the true weight of the extra taxation that the Budget has introduced. Herds are being reduced and farmers are selling cows for meat. Whatever milk subsidies are arranged by the Government and whatever help they give for the short term will be consumed before very long, whereas the extra taxes—lp on a pint of beer and 5p on a packet of cigarettes—will be of a lasting character.
It is a fact, as the Chancellor of the Exchequer said during his Budget speech, that the cost of food subsidies will be met by the extra cost of the duties on beer, tobacco and spirits. The Government must know that food subsidies, if they amount to only £500 million, will not last very long, and we have already seen the process at work.
The right hon. Lady the Secretary of State for Prices and Consumer Protection announced the other day that there is to be a subsidy on bread, at a cost of £21 million, but because the cost of world wheat was not included in that calculation the bakers are to see the Secretary of State within the next six weeks. If the price of world wheat is covered by another subsidy, the total cost in a period of about two months will be about £70 million, not £20 million. That illustrates the difficulty facing the Government.
The same argument applies to milk subsidies. The number of dairy herds is being diminished because of the low return that farmers are getting for milk and because of the high price of animal feed.
It will be within the recollection of the House that some years ago M. Mendes-France was Prime Minister of France. He put forward a rather improbable programme to get himself reelected, suggesting that the French should drink less wine and more milk. As a political programme it was one of the shortest lived in recent history, and not much was heard of M. Mendes-France after that. I understand perfectly well that the Labour Party, with its food subsidies and the subsidy on the price of milk, is trying to reach a form of social contract. I suggest, however, that when trade unionists consider whether to cooperate with that social contract they 719 will have very much in mind the extra burdens on the price of beer and tobacco and may well neglect the help which they have received for their families through the subsidy on milk, if, indeed, that subsidy lasts very long. As my right hon. Friend the Member for Carshalton (Mr. Carr) said yesterday, it would have been much better if these subsidies had been applied to the families who really needed them, through family allowances or by raising the tax threshold.
In his Budget judgment, the Chancellor had to decide how to keep a balance between the need to control inflation and the need to avoid unemployment—a very difficult balance to preserve and one which, in my view, involves a question of confidence both at home and abroad. Confidence at home requires a prospect at least of higher profits. Hon. Members on the Government side are well known for their antipathy towards higher profits, yet it is only the prospect of higher profits which can provide the prospect of higher investment and of higher wages. But, instead of that, we find in the Budget a higher corporation tax and, in particular, an addition to the advance corporation tax which will create severe difficulties for company cash flow.
The Chancellor said that profits had increased substantially last year. I think he said that profits increased by some 30 per cent. But if the element of stock appreciation is taken away, profits rose in fact last year by 15 per cent., much in line with the overall level of earnings. Far more important, however, is what the level of profits is likely to be this year. In all probability the level of profits will decline, and it will be on this lower level that the advance corporation tax and the higher rate of corporation tax will have to be found.
Moreover, even the 15 per cent. increase in company profits last year did not include any allowance for inflation accounting—that is to say, for the real cost of replacing plant and machinery, now so expensive as to be prohibitive for many companies.
Companies are finding that bank finance is very expensive. This is one of the problems they face. Now, in addition, there is the arbitrary intervention of 720 the Price Commission. With the activities of the Price Commission, there is no possibility of their knowing when they may be called upon to reduce their gross profit margins, and that offers very little incentive to improve gross profit margins by cutting out waste and unnecessary costs.
There is, therefore, precious little incentive for companies to improve their efficiency. In addition they are having to pay a higher insurance contribution for their employees, and they have to meet higher steel, electricity and oil prices, all of which must be passed on.
One of the problems which the Government have to face is that companies throughout the country have been running down their stocks in recent months. They are, in relation to production, at their lowest level for 10 years. It is certain, therefore, that companies will be stocking up and that a great deal of money will be tied up in this way. They will probably, in addition, have to face higher wage demands, which is bound to result in many people being laid off and, in consequence, a higher rate of unemployment.
Will the Budget do anything for confidence abroad, apart from confidence at home? I think that this is doubtful. I think that it is mean and vindictive to increase stamp duty by 1 per cent., and this decision needs looking at very carefully. I am certain that it will result in the loss of a substantial sum of foreign invisible earnings and will not be worth doing.
What is most likely to concern foreign opinion is the size of the borrowing requirement of some £2,700 million. It is less than it was last year but is still very high by historic standards. It is essential that this large element of borrowing requirement should be met by genuine savings by the non-bank public and not simply by taking it from the banks and by printing money through the Government machine.
The difficulty is that the proposals for the higher taxation which the Chancellor outlined on Tuesday inevitably mean that it will have to come from private savings and a good part of it will come from savings in gilt-edged securities, the very element which the Government ought now to be trying to encourage by every 721 means at their disposal, particularly as we have today seen the gilt-edged market at its lowest level ever. There is a stock called the 2½ per cent. Consolidated Stock which has been around since 1752 and it stands today at 17⅜, which is its lowest level ever. There is already real danger of collapse of confidence in the very short time the Government have been in office, and it will not do for them to suggest vindictive measures which will damage confidence at home.
One other difficulty is that it is a question not simply of the position of the Government to be able to borrow at all but of the total cost of their borrowings in recent times. The Budget estimate of the interest burden on Government securities last year was just under £2,000 million. In one year the estimate has gone up to £2,560 million. In one year the burden of debt interest has gone up by over £500 million—no small figure.
The difficulty is that this is not the only element of borrowing requirement—that is to say, deficit financing—in which the Government are involved. Although there are to be considerable increases in the prices of nationalised industries, they will still nothing like cover the costs of their operations. The electricity industry wanted a price increase of some 50 per cent. but is getting, in August, 30 per cent. The steel industry wanted a 30 per cent. increase and is getting 25 per cent. The gas industry needs £30 million and is getting nothing. There is, therefore, a large deficit, even on the domestic account, of the nationalised industries which will require to be borrowed through the general borrowing requirement.
But, of course, this does not cover the cost of financing the nationalised industries' capital programme, much of which will be borrowed overseas with foreign currency. Altogether £730 million was borrowed abroad last year and it seems that there will be another £540 million this year. It is doubtful whether this policy is desirable. The interest has to be paid in the currencies of other countries, which has so far proved very expensive and is likely so to continue. In present market conditions it is surely not right to continue to borrow at that sort of rate, and everything must be done to make the nationalised industries more independent and more economically viable.
722 A difficulty also is that as the nationalised industries' prices rise, the threshold agreement in the phase 3 policy is bound to be reached fairly soon. This is the difficulty. A threshold agreement which will allow wages to become higher will, of course, be reached at the very time when those wages will be acting on small supplies of stock, and that in itself is fairly certain to increase prices considerably.
I think that a permanent policy for prices and incomes of which a threshold agreement forms part needs careful reexamination. The objection that can surely be made to it is that no such policy can ever work in containing inflation if it is used on its own in isolation. If a determined and appropriate monetary and fiscal policy is not used, and if total reliance is placed on controlling inflation by law, this can work for a time, as was demonstrated by phases 1 and 2, but the very nature of a permanent policy for prices and incomes will sooner or later trigger defiance by a group of workers.
It makes even less sense to have a policy of controlling prices but not of controlling incomes. That is a recipe for disaster. I do not think we can for ever go down the road of a permanent policy of statutory control of prices and incomes, paying more here and subsidising through costs there. If we do this, militants in the trade unions are bound to be helped because the full consequence of their actions is not brought home directly to the general public, since the cost of those actions is disguised by subsidies. If the economy is to be run intelligibly, if we are serious in what we say about controlling inflation, we must employ an appropriate monetary and fiscal policy and at the same time depend less on subsidy—that debilitating drug to economic systems.
The people will be bemused by the Budget. They were told that it was to be tough, but they were also told that it would fall on the broadest shoulders. I suppose we can comfort ourselves with the reflection that we are all broad-shouldered now because we are all having to bear the burden. Labour supporters have relied on the Chancellor to soak the rich and on the Secretary of State for Employment to hand out the money. Now, they find that they are handing out money themselves and the Secretary of State is empty-handed. It is difficult to know 723 which will come first, the resignation of the Secretary of State or another General Election. As soon as the Secretary of State has to say "No", that will be the time for him to go. Whichever it is, the people know that they have been hoodwinked by the Government and they will not forget it. We are in far too serious a state of affairs for a Labour Government to handle, and this will soon become apparent at home and abroad.
§ Mr. Deputy Speaker (Mr. George Thomas)
Order. Before I call the next speaker, I appeal to hon. Members to exercise self-discipline, otherwise a number of hon. Members who have been waiting a long time to speak will not be called.
§ 8.8 p.m.
§ Mr. Bruce Douglas-Mann (Mitcham and Morden)
I, too, congratulate the three maiden speakers who preceded the hon. Member for Horsham (Mr. Hordern). If it is not presumptuous for me to say so, their standard was such that I think that many hon. Members who have been in the House a long time would envy them.
I draw the attention of the hon. Member for Tonbridge and Mailing (Mr. Stanley) to the fact that the "pinta milk" is not the traditional "pinta" of hon. Members. While milk is to be subsidised for all of us, effectively the cost is to be met from additional taxes on alcohol and tobacco, and it is difficult for the Opposition to argue that it is contrary to any desirable social standard to subsidise the milk of families at the expense of alcohol and tobacco.
This for me is almost the occasion of a second maiden speech, as I am speaking for the first time for the new constituency of Mitcham and Morden. On behalf of my constituents I should like to pay tribute to my two predecessors, both of whom would have been serious losses if they had not returned to the House in different constituencies, the right hon. Member for Carshalton (Mr. Carr) and the hon. Member for Plymouth, Drake (Miss Fookes). Both of them are highly regarded in the constituency. It is a great pleasure for me to be a Labour Member returned for a constituency 724 formed from two previously Conservative constituencies.
This constituency also suffers, as does the constituency of the hon. Member for Reigate (Mr. Gardiner), from the projected M23 which is to be driven through it. I trust it will be one of the early measures of this Government to decide that the priority which has been given to the road programme should be altered when assessing future policy.
In moving from Notting Hill to Mitcham and Morden I had expected to find that I was getting out of the area of acute housing stress. It is true that I am finding fewer evictions, but I am still finding intense housing stress, despite the fact that the Labour council there is doing its best to diminish and alleviate it. It cannot find additional land on which to build, and consequently the only way in which it can acquire additional housing is by buying up existing houses.
This brings me to the first of the three points I wish to make on the Budget proposals. It relates to the provision of funds for the acquisition of housing. In the Chancellor's Budget speech he referred to £200 million which is being made available for additional housing purposes. Of that, £70 million goes for further subsidies resulting from the freeze in rents, leaving £130 million for the acquisition of houses. I welcome the fact that there is to be this sum, but at £10,000 a house, which is a conservative figure in the South-East, it would amount to only 13,000 houses. That would not go a very long way in meeting the problem.
The Chancellor also said:We have made clear our belief that, particularly in the worst areas of stress, the development of municipal ownership is essential. But this programme cannot have quite so high a priority as the steps I have already described."—[OFFICIAL REPORT, 26th March 1974; Vol. 871, c. 299.]I do not accept that. The decision by the Chancellor that he cannot proceed with the acquisition of existing houses at the rate he and we would wish is based on a fallacy. I urge the Government as quickly as possible to establish a new Government housing gilt-edged stock, and, when housing is acquired—existing let housing—such stock carrying an income equivalent to the fair rent for that housing should be issued 725 as compensation. I am referring particularly to houses already let or those which were let on last occupation.
If this is done the State will be acquiring an income-producing asset. In exchange it will be delivering another income-producing asset. I appreciate that at present we treat in the same category public sector borrowing, which is borrowing for purposes involving a reallocation of resources, and borrowing which is merely to finance transfers. I urge the Treasury to adopt a different form of accounting procedure to draw a distinction between borrowing which involves allocation of resources, as new house building necessarily does, unfortunately, and borrowing which is merely exchanging one income-producing asset for another, which is the case when let housing is being acquired. Such housing is regarded by its existing owner as an investment. It would be replaced by another investment which would bring in a comparable income. At the same time, transfers of this kind would enable us to bring in the 100,000 houses standing empty in London and hundreds of thousands more elsewhere, which would ensure that we do not have the continuing threat of increasing homelessness which now prevails throughout the country, most intensely in major cities.
I have briefly summarised the argument set out in much greater detail in the Fabian Society pamphlet "The end of the private landlord" prepared by the Society of Labour Lawyers. I would urge that the Government should study this, particularly the sections dealing with compensation. I strongly believe that this is one of the most essential social measures that can be taken quickly to alleviate housing hardship.
Secondly, I urge the Government to try to set up a stabilisation fund with the building societies as quickly as possible. The alternation of surplus and famine in mortgage finance has been substantially responsible for the great rate at which housing and property prices have risen. The flood when supply is fixed necessarily drives up the prices but the famine also drives up prices because building firms cannot maintain a stable work force when they do not know whether they can sell their houses. Although I greatly welcome the proposals contained in the 726 Budget likely to assist in that respect, they will not go far enough.
It would have been much easier to have set up a stabilisation fund when the building societies were in surplus as they were in 1972 and as was urged on the then Government. The financial institutions should now be required by law to deposit a certain proportion of their funds with the building societies or the Housing Corporation to ensure that there is a steady and stable flow of mortgage funds. In times of plenty the requirements on the financial institutions could be cut down, but, in general, there should be this requirement.
Thirdly, I urge the Government to consider tax measures discussed in the Labour Party document "The Politics of the Environment", particularly the proposals for taxes to prevent unnecessary waste in our throw-away society. I have in mind taxes such as the time-graded car tax, the resources tax and other measures to discourage the waste of resources in a world where resources are undoubtedly finite even if they perhaps exist in quantities greater than some doom watchers have contended. We cannot continue to waste resources in the way we are doing.
I respond to your appeal, Mr. Deputy Speaker, by limiting my remarks to these three points. I hope the fact that I have spoken briefly will not cause either the Minister to neglect to deal with them or, even more important, his civil servants to forget to consider them later.
§ 8.18 p.m.
§ Mr. Tim Renton (Mid-Sussex)
I thank you, Mr. Deputy Speaker, for calling me at this late stage in today's debate. We, the maidens, have today been rather like the cygnets in Swan Lake, each waiting in the wings to do our solo turn. I must request the indulgence of the House in asking hon. Members to listen to yet another maiden speech.
The new Mid-Sussex Division for which I have the honour to be the first Member represents the western halves of both the Lewes and the East Grinstead constituencies. Apart from a mental aberration in 1906 when a Liberal Member was returned to Parliament with a small majority of 262, East Grinstead 727 electors have been consistent in returning a Conservative Member.
I wish to pay tribute to my hon. Friend the Member for East Grinstead (Mr. Smith), who has represented the constituency since 1965. He was in the Conservative Government a hard-working and assiduous Minister. He is well-known and liked by his constituents, and two days ago he piloted the Ashdown Forest Bill, against stiff opposition, through its Second Reading in the House.
The Beamishes, father and son, represented the Lewes constituency for nearly half a century—a remarkable record. My hon. Friend the Member for Lewes (Mr. Rathbone), in a felicitous maiden speech two nights ago, paid a warm tribute to Colonel Sir Tufton Beamish. Apart from his hard work in the House, on committees and in the European Parliament Sir Tufton Beamish was greatly loved and respected by his constituents. He never failed in his devotion to their affairs, and when canvassing part of his constituency which I now represent I have heard many tributes paid to him by the many people whom he has helped over many years.
The Mid-Sussex constituency represents in microcosm South-East England. We have rural areas, farms, unspoilt villages, beautiful landscape, particularly the forest ridges to the north, and the South Downs on the border of the constituency. We have commuter towns, notably Haywards Heath, that came into existence towards the of the last century as a result of the opening of the London to Brighton line. To the south of Haywards Heath there is the rapidly growing town of Burgess Hill, with its thriving civic centre and industrial estate and a rapidly growing population.
Although one might think of Mid-Sussex as a part of the Garden of Eden in the South-East, it must be pointed out that we in our area have a major problem. It stems from the fact that in 1970 in the Strategic Report for the South-East we were labelled a "major growth area". This means that in the Crawley-Gatwick region—which is also represented by my hon. Friend the Member for Horsham and Crawley (Mr. Hordern) —our population is expected to grow between 1971 and the end of the century 728 by 250,000 people—in other words, from 400,000 to 650,000. Already, because of this population growth, there is considerable pressure on the supporting services —roads, railways, schools and hospital facilities. In the last few years it has been difficult for young doctors and young teachers coming to the area to buy houses at a price which they can afford. In addition to this major growth label, we have Gatwick on our western border. In planning a population growth of 250,000, the planners allowed for the fact that the number of passengers moving from Gatwick would increase five-fold—from 6 million last year to 30 million by 1990. This was allowed for although, in addition, there is a considerable noise shadow arising from Gatwick which affects some of my constituents considerably.
In an independent report produced some years ago it was stated that in regard to population adversely affected by air transport movement Gatwick was less acceptable than three out of the four Roskill Third London airport sites.
Now, in the last few days, we have heard from the Secretary of State for the Environment and from the Secretary of State for Trade that the whole Maplin project is to be put under close scrutiny, as is required by Parliament. The hon. Member for Glasgow, Maryhill (Mr. Craigen), in an eloquent maiden speech a few moments ago, stated that he believed the whole Maplin project should be scrapped.
The Chancellor of the Exchequer in his Budget speech said that no further money would be allocated to Maplin. I should like the Government to pause for a moment while they look at Maplin. If one of the solutions is to be the building of a second runway at Gatwick, this will mean not only a great increase in the noise problem but a substantial increase in population growth. The population growth, instead of amounting to 250,000, would then, it is estimated, be 430,000 in the Crawley-Gatwick sub-regional area. That means, in effect, a doubling of the population in just over a generation. The housing problem, the pressure on amenities and other factors would become very much worse as a result. Let the Government not consider the option of a second runway at Gatwick without considering the serious 729 problems indeed that will be caused in Sussex and the areas surrounding Gatwick.
§ Mr. Renton
Yes, and Surrey too.
For many centuries we have been happy to consider ourselves as living inThis fortress built by Nature for herself…This little worldThis precious stone set in the silver sea.But let not our insularity blind us to the fact that, as a major trading nation, we need to develop the best modern airport and seaport facilities.
I was pleased to hear the Secretary of State for Social Services yesterday announce that attendance allowances were being substantially increased. I know from many of my constituents how useful they have found attendance allowances, particularly for the mentally retarded child or adult who cannot be left alone. In past days, such handicapped people would have had to be placed in hospital but, thanks to the attendance allowance, they can now often be kept at home. The constant attendance allowance was first introduced by the Conservative Government. I am pleased to see that it is being increased, but I would urge the Secretary of State for Social Services to look closely and urgently at the eligibility criteria for attendance allowances and for disability allowances as well. I believe that there are a number of categories of people—for example, the injured young mother with children or those born crippled—for whom the present criteria are a little too harsh. I believe that my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) had in mind a study for easing the eligibility criteria. I hope that the Secretary of State will proceed with such a study with some speed.
I want finally to comment on a matter which the Chancellor of the Exchequer raised in his Budget Statement. He spoke about the dizzy rise in commodity prices, including oil, and he looked forward to a possible flattening or even decline in commodity prices during the course of this year. In the past six months we have all been looking for peaks in commodity prices, and we have been disappointed. It is possible that, because of the substantial fall-off in car production in the United States and in Germany over 730 past months, we shall now see declines in the prices of non-ferrous metals. But, as someone who over past years has worked on the commodity markets, I believe that the rôle of the speculator, though much attention has been given to him, in causing these price rises has been exaggerated greatly.
If statistics can be made available, I believe that it will be found that, although the speculator has in some cases caused price rises to happen slightly more quickly than otherwise might have been the case, the amount of positions taken up by non-trade accounts, even in recent hectic months, has been kept within very reasonable levels.
It has been suggested that a Royal Commission should examine the commodity markets. I do not think that they have anything to fear from this idea. I believe that they would welcome it, although I cannot say that I think that it would be a suitable instrument. Some years ago the present Prime Minister said that Royal Commissions took years to produce minutes. I urge, rather, the Government to ask each commodity market to look at itself for disciplining purposes. If contracts are anachronistic and out of date and if the differential between one grade of commodity and another is no longer valid, these matters can be put right very quickly by the commodity markets themselves. Equally, margins can be tightened, and clearing house procedures can be improved. These are steps for further disciplines within the commodity markets which could, and should, be taken quickly, and I think that they would be welcomed.
As I say, the rôle of the speculator has been exaggerated. The real cause of the rise in commodity prices has been the fact that for nearly a generation since the Korean war we enjoyed the benefit of very stable commodity prices which did not keep up with inflation. In the past two years, with the rapidly increasing pace of inflation and a distrust of currencies, commodity prices have soared.
It is noticeable that CIPEC, the organisation of some of the major copper producing countries, showed in its most recent report that, by deflating the sterling price of copper for inflation as reflected in the United Kingdom manufactured goods wholesale price index, the 731 price of copper, despite its very rapid rise, was actually lower on that deflated basis by some £100 per ton in the last quarter of 1973 than in the first quarter of 1966.
Thus it is the fact and the fear of inflation which has caused commodity prices to rise and is likely to cause them to remain at their present levels. I regret that the Chancellor of the Exchequer, in his Budget speech of two days ago, did not do nearly enough to still that fear of continuing inflation.
§ 8.33 p.m.
§ Mr. David Stoddart (Swindon)
I must congratulate the hon. Member for Mid-Sussex (Mr. Renton) on his maiden speech. I listened to it with pleasure and with a great deal of interest, especially when he talked about the expansion which is to take place in his constituency. I represent Swindon, which has been an expanding town for a long time. I was glad to note that the hon. Gentleman understood the problems which face his area and which will face him. Having heard him I feel sure that he will deal with those problems with satisfaction to his constituents, and I can see that he will bring those problems to the attention of the Government in due time. I look forward to hearing his future contributions, as I shall look forward to hearing those of other maiden speakers who have intervened in this Budget debate. We seem to have an excellent crop of new Members, and the House will be all the better as a result.
I want also to congratulate my right hon. Friend the Chancellor of the Exchequer on his Budget, which he had very little time to prepare. It is probably not realised that he had not about three weeks, but between seven and 10 days, in which to do it. It was a marathon task and he is to be congratulated on what he has produced. I welcome the Budget generally as being fair and certainly correct so far as it gives priority to the pensioners and to the long-term sick and disabled.
During the General Election campaign I found that people were expecting a tough Budget—make no mistake about it —because they knew at that time that, apart from the ravages caused by the three-day working week, the country had 732 been slipping into massive insolvency both at home and abroad. In the light of the balance of payments deficit, both non-oil and oil, and the enormous net borrowing requirement stacked up by the previous administration, it is remarkable that the Budget is not a great deal harsher.
What worries me a great deal is the seemingly irresponsible attitude of the Opposition towards the Budget and to our economic and financial problems generally. It is disgraceful that Opposition Front Bench spokesmen should seek to make short-term political capital out of the country's long-term problems. They are particularly brazen about it. It ill becomes them at this stage to criticise an administration, only three weeks old, for their efforts to deal with the economic, financial and industrial chaos left to them by their predecessors.
During the last three years the former Chancellor of the Exchequer—unlike the political heavyweight Chancellor we have at present, the right hon. Gentleman has always been a political lightweight—played ducks and drakes with our economy and led the British people into a fool's paradise by convincing them that they could go on indefinitely living beyond their means. Of course that could not be. Inevitably Nemesis had to catch up. When the previous Chancellor saw it about to tap his shoulder, however, he persuaded his right hon. Friend who is now Leader of the Opposition to cut and run for it. Again, therefore, as in the past, the Labour Party is left with a catastrophic—I think that is the right word to use—situation and has to take the measures necessary to clear it up.
The Government have made a very good start. Indeed the measures proposed to reduce the net borrowing requirement during the next financial year seem to have had a beneficial effect, because on foreign exchanges the pound has already improved by no insignificant amount. This in itself shows that there is confidence abroad in the ability of the new Government to tackle the problems before us.
Furthermore, the reduction in the net borrowing requirement will have a beneficial effect on prices, because over the last four years, as the former right hon. Member for Wolverhampton, South-West, Mr. Powell, was for ever pointing out, 733 this net borrowing requirement, this printing of money, was pulling up prices and adding to world inflation and cost inflation at home.
I should have liked to see the cuts in public expenditure made by the previous Chancellor of the Exchequer restored, particularly those relating to education and health. But I understand—indeed, so will the country—that that is not possible at this time. However, I hope that those cuts will be restored as soon as possible and that the improvements in our public services, which are essential to good living, will be resumed.
Some of the measures in the Budget will hurt, and it is no use pretending otherwise. That which will hurt most is the steep rise in electricity prices, but this cannot by any stretch of the imagination be blamed on the present Chancellor or the present Government. As far back as 24th January 1973 Sir Peter Menzies, the Chairman of the Electricity Council, told the Select Committee on Nationalised Industries, of which I was then a member, that at the beginning of stage 1 of the prices and incomes policy domestic electricity prices needed to be increased by 25 per cent. But the then Government decided to make no progress towards correcting the disequilibrium which had come about. I warned at that time that the process of restoring the electricity industry to financial viability would be painful, and so it has proved.
The present Chancellor has had the courage to make a start and his decision, however much it might hurt in the short term, must be right for the long-term future of that industry. I hope that this will be a lesson for the future and that Governments will not again so tamper with our public industries as to bring them nearly to their financial knees and into public disrepute at the same time. The time has come to stop treating these industries as political footballs and to let them get on with the job that they were set up to do—to give a good service at reasonable cost to the general public.
Also, it is now essential to conserve energy. When fuel supplies are by no means secure, when they are costly and likely to become even more costly, it is not good business to charge below cost for energy supplies. In the months ahead my right hon. Friend the Chancellor 734 might like to consider whether advice and perhaps help can be given to householders about better insulation of their homes. This will save them money and the nation vital fuel resources.
The Government should also seriously consider import saving through recycling and preventing the waste of scarce raw materials. It is well known that every year 750,000 tons of steel scrap could be reclaimed if tin cans, many scattered on highways, byways and beauty spots, could be re-used. There is a world shortage of paper, yet every year probably millions of tons of paper are burned in local authority furnaces or ploughed into the ground. We can no longer afford such profligate waste of raw materials. This matter needs more attention than it has so far had.
Pensioners are delighted with the increase in pension rates and will be even more pleased to have had it confirmed today that heating and dietary allowances are also to be raised, and that prescription charges for retired women between the ages of 60 and 65 are to be abolished. I have consistently supported this object and indeed once nut down an Early-Day Motion on the subject. I am delighted that that nonsense has been swept away.
This is the best increase that pensioners have had, but it is essential that the purchasing power of the pension is not allowed to fall. That is why I welcome the assurance that pension rates will in future move in line with wage and salary movements.
Widows are often left in a difficult financial situation. They still have to pay the rates, the mortgage or the rent and the upkeep of the house. My right hon. Friend the Chancellor should at some time in the future consider the tax position of widows. I am sure that any assistance he could give them would be welcomed.
I look forward to the next Budget in about six months' time, I suppose, when I hope to see a further shift towards the five-year programme set out in the Labour manifesto. One of the things I expect to see, as does each of my colleagues in the Labour Party, is a further redistribution of wealth by a wealth tax. I congratulate my right hon. Friend the Chancellor on the job he has done and I look forward to his future action.
§ 8.45 p.m.
§ Mr. Michael Marshall (Arundel)
I am extremely grateful for the opportunity of speaking and it is with a keen sense of the fellowship we enjoy in this House that I rise to make my maiden speech. I pay tribute to the friendship extended not only from the Chair but also from right hon. and hon. Members in all parts of the House to new Members like myself. At no time is this perhaps more apparent than at the testing moment when a Member makes his maiden speech. I shall therefore have little difficulty in trying to make a non-controversial speech and I hope to carry the House with me in some of the thoughts I shall express.
My constituency has been carved out of the old Chichester and Arundel and Shoreham constituencies. My predecessors included the late Henry Kerby and Bill Loveys, who were well known to many hon. Members and are affectionately remembered. Subsequent Members include my right hon. Friend the Member for Chichester (Mr. Chataway) and my hon. Friend the Member for Shoreham (Mr. Luce). It would perhaps be invidious of me to say too much about two sitting Members; my comments might be misconstrued. However, the examples they have set in the early assumption of ministerial and Whip's responsibilities are certainly worthy of emulation, although it is perhaps wise to remind myself that lightning rarely strikes thrice in Sussex.
The new Arundel constituency takes in a large slice of the Sussex coast, stretching from Pagham in the west to Ferring in the east. It includes Littlehampton, Bognor Regis and other seaside towns. To the north it lies along the foot of the Sussex Downs and it includes, of course, the mediaeval town of Arundel. While there are important light engineering industries and boat building in Bognor and Littlehampton, it is in three main areas that the industries of my constituency lie and, with permission, I shall give a brief account of them.
The first main industry is horticulture. Along the coastal plain of Sussex there are orchards, market gardens and, above all, glasshouses. In the stretch of coast I have described there are about one-tenth of the glasshouses of the United 736 Kingdom. This area includes well-known mushroom growers, the country's largest tomato and flower nurseries and the leading glasshouse research institute in Britain.
Our second main industry is perhaps predictable, given the mild climate and sandy beaches which we enjoy. It is the holiday industry. In addition to Bognor Regis and Littlehampton and the other seaside resorts along our coast, we have a long tradition of attracting holidaymakers. Bognor Regis may have its Butlin's but, while I make no invidious comparison, perhaps the outstanding characteristic of the coastline is the quiet, unspoilt charm which brings holidaymakers back year after year. Some find the temptation to stay amongst us well nigh overwhelming.
This brings me to the third industry—the retirement industry. In my electorate of 83,000 people there are 38,000 aged over 65. Allowing for even a modest number of women over 65 and for widows, over half of the people in my constituency are retired. I do not know how one measures comparisons with other constituencies, but I suggest that this puts me high in the league of representing pensioners. I may be competing for a title in this respect with my hon. Friend the Member for Worthing (Mr. Higgins).
As there are so many pensioners in my constituency it will not surprise the House that my view of the Budget is concerned with the way it affects pensioners. It has now been clearly shown that the main parties are agreed on at least the two major objectives of pension policy, the first being that the pensioner is the most important sector in our social security system. Secondly, we are all agreed that pensions should be kept ahead of rises in the cost of living. We are entitled to be proud of the work of the Conservative Government in this sector, but I am equally glad to welcome some of the Budget proposals made in this regard by the Labour Government. However, there is a great danger in debating on a competitive basis "who does what" for the pensioner.
I turn therefore to some of the principles which should underlie the thinking of all Governments regarding the pensioner. It has been said many times in the House that we are now all minority 737 parties. It is equally true that we shall all be pensioners—a salutary thought when we address ourselves to the subject. If I am attempting to review some of the basic principles, it is with a sense of trying to remove some of the remaining injustices and difficulties which many pensioners face.
I put three specific proposals to the Government. These proposals are primarily designed for the Secretary of State for Social Services and I hope that her colleagues will convey them to her. If in the concluding speech there are no specific assurances on my points, I hope that there will be at least agreement in principle.
First, I wish to urge consideration of the position of the reduced-rate pensioner. Many other hon. Members must have constituents like mine who accepted a reduced pension 10 years or more ago. At that time the difference between a reduced-rate pension and the ordinary flat-rate pension was in many cases marginal. Many people who had not sufficient stamps in the qualifying period looked at the difference and decided that the reduced pension was a reasonable settlement.
However, the problem is that there have since been steady increases in the absolute rate, as most recently evidenced in the Budget, while the reduced-rate pensioner has been getting only pro rata increases, and cases of hardship have resulted. Given that increases in pensions are supposed to reflect increases in the cost of living the full rate of increases in pensions should be granted to all pensioners, irrespective of starting point and irrespective of any modest private means.
That brings me to my second proposal. I add my voice to those on all sides of the House—the matter has been debated many times—who seek the abolition of the notorious earnings rule for pensioners. "Notorious" is the word, since if there is one subject which arouses anger and a feeling of injustice among my pensioners it is this rule, because of the thought that it discourages many of them from trying to maintain their independence. Many do not want to go on to supplementary benefit.
Whichever party is in power, the Government should try to find a way to help the elderly who seek to be thrifty and wish to look after themselves. I am glad that 738 the previous Conservative Government, and now the present Government, relaxed the earnings rule, but I urge the Government to commit themselves in principle, as my party has done, to the total abolition of the earnings rule.
I come finally to the question of longterm proposals for improving the lot of the pensioner. Here we should address our minds to the possibility of earlier retirement. The Government, as the largest employer, can lead the way. They can set the example. There is abundant medical evidence in support of earlier retirement. I believe that many of us take the view that in this day and age retirement at 60 would be equitable, given the new equal status of men and women.
It will be argued that the cost of retirement at 60 would be high; I believe that it has been estimated at about £750 million. That could be offset, however, by a progressive reduction in the form the benefit takes. We could have something like the Belgian system, with earlier retirement on phased scales of the total pension figure in that way moving towards the earlier retirement that I suggest.
It is very important that we take advantage of the new climate of opinion in which all sections of our community, particularly the trade union movement, are taking an increasing interest in the idea of earnings-related pensions and earlier retirement. As we move more and more into a service economy, so it is appropriate that that kind of provision should be made. In that way we may use the energies and talents of a rising labour force of both pre- and post-retirement ages.
I return to where I began, with one eye on the clock. As a spokesman for a largely retired constituency, I have tried to show that many right hon. and hon. Members could do worse than retire into my constituency. We have there an undertaker with a somewhat sombre sense of humour, as perhaps befits his profession. He is a formidable debater. His technique is very simple. He allows the argument to run its course and then, when he sees the other side pausing for breath, simply says "I've seen 'em come, I've seen 'em go, but I gets 'em all in the end."
We may not be so fortunate as to attract you, Mr. Deputy Speaker, and other right hon. and hon. Members to 739 retire to my constituency, but I hope that I have been able to carry with me tonight the general sentiments of the House. If, beyond that, Mr. Deputy Speaker, you choose to retire to my constituency, you will receive a warm and friendly greeting, such as the House has extended to me tonight.
§ 8.59 p.m.
§ Mr. Terence Higgins (Worthing)
A feature of the debate has been the fact that there have been no fewer than eight maiden speeches. Having listened to almost all the debate, except about 20 minutes. I feel that I can also say that its standard has been rarely equalled in Budget debates.
All Members who have made maiden speeches have paid tribute to their predecessors, but in some cases, because of the work of the Boundary Commission, they had no fewer than three predecessors. Therefore, I do not propose to comment on all their predecessors as well as on all their speeches. I shall try to do the latter. Some of the speeches were controversial, more controversial than used to be the custom, and some were not.
First, we heard the hon. Lady the Member for Coventry, South-West (Mrs. Wise), who represents a new constituency. She spoke with great fluency. She expressed a concern for the social services which we all share, and she widened her horizons to deal with multinational companies. We are perhaps a little disconcerted by the fact that she first condemned them and then asked for an inquiry into the facts. We shall none the less listen with interest to what she has to say in future.
Next we heard my hon. Friend the Member for Gosport (Mr. Viggers), who has the privilege of representing a South Coast constituency—a privilege not to be lightly under estimated as far as Conservative majorities are concerned. He paid tribute to his predecessors. He made some perceptive comments on the Scottish temperament in relation to the development of North Sea oil. He took up a number of the points made by the hon. Lady the Member for Coventry, South-West. The House always welcomes hon. Members who are prepared to debate rather than make set speeches. Any new 740 Member who can achieve that has the congratulations of the House.
The hon. Member for Walsall, South (Mr. George) also paid tribute to some of his predecessors and referred to one to whom I should also like to pay tribute; namely the former Member for part of that constituency Sir Harry d'Avigdor-Goldsmid. I am sure I carry the whole House with me in saying that over the years he has made a major contribution to our Finance Bill and Budget debates. He will be greatly missed.
Many of the points made by the hon. Member in his speech would have been solved by the adoption of the tax credit scheme proposed by the Conservative Government for which the present Government do not propose to legislate.
My hon. Friend the Member for Tonbridge and Malling (Mr. Stanley) spoke with feeling about the plans for the Channel Tunnel. He also referred to my hon. Friend the previous Member for Tonbridge, Mr. Hornby, who was regarded with great affection in the House.
My hon. Friend the Member for Reigate (Mr. Gardiner) made some remarks about Gatwick Airport and mortgage rates. I share his views about the effect of Gatwick on the environment, not least perhaps as noise in Worthing may result from that development. My hon. Friend the Member for Reigate has the distinction that for a number of years he has been a member of the Press Gallery. Although we frequently lose hon. Members who go upstairs to another place, we rarely acquire a new Member who has descended to us from the "gods". We welcome his presence.
The hon. Member for Glasgow, Mary-hill (Mr. Craigen) appeared to be speaking without notes—something which the House always views with some envy, though I feel bound to say that I realised after some time that he had notes but one could not see that he was using them. If he comes to the Front Bench he will find that that is not possible to do. None the less, he spoke with great fluency.
My hon. Friend the Member for Mid-Sussex (Mr. Renton) also referred to Gatwick Airport and survived an intervention, rather unprecedented perhaps, from my right hon. and learned Friend 741 the Member for Surrey, East (Sir G. Howe), to the effect that it affected Surrey as well as Sussex. That is certainly so. My hon. Friend, who also dealt with commodity markets, made a perceptive speech.
Finally, the constituency of my hon. Friend the Member for Arundel (Mr. Marshall), adjoins mine. Ten years ago in my maiden speech I had the privilege of raising the question of the over-80s, as my constituency also has a pensions problem. I listened with great interest to the points which he made about the reduced rate pensioners. This is a point of which the House will have taken note.
My hon. Friend the Member for Ton-bridge and Malting put much stress on pronunciation. Perhaps I may make a remark which has been made before, which is none the less apposite, about a production of Mr. Noel Coward in the 1930s, when it was said that it was "Cavalcade pronounced success". We can say at the end of eight maiden speeches that it has indeed been a cavalcade, and it has indeed been a pronounced success.
I welcome the Chief Secretary to this debate and congratulate him on his appointment to his high office. We have heard him many times before in Finance Bill debates, on both sides of the House. He has not been well in the last few days. We are very glad to see him with us again, and we look forward to seeing him back on his feet, replying to the many points that have been made in the debate.
I shall ask a number of questions which, perhaps, could be more appropriately answered at a later stage, but there is one point I wish to raise now. There are reports in the evening paper to the effect that consultations have been proposed regarding the indirect tax changes and the price code, these consultations about amending the code having resulted from a requirement on the Treasury to consult representatives of those affected. It is suggested in the Press that the amount of notice given was very short. Some of the associations, it is reported, only received the letter in the morning asking them to attend a meeting at 11 o'clock. Consequently, it is said, very few of the 16 could attend, and they were unable to send adequate representatives.
742 I shall be grateful to have the facts from the Chief Secretary. If the consultation has not been as effective and reasonable as it ought to have been, will he give an assurance that proper consultation will take place about this change with the various trade associations affected before a final decision is made and before any order is laid before the House?
The Chancellor of the Exchequer was rightly congratulated on the presentation of his Budget. Many of us thought him a reformed character, for his speech was markedly different from his presentations in opposition. Not infrequently, his technique was to make a statement which my hon. Friends did not believe. We would challenge him, and he would maintain that it was true. We would challenge him again, and finally he would agree that it was not true. Shortly afterwards, he would make another statement which was also untrue, well knowing that one could not go on interrupting him indefinitely. That was frequently his technique when in opposition.
I thought that the right hon. Gentleman had reformed in the course of his Budget speech, but yesterday he broke what is a golden rule for Chancellors—instead of just making his Budget Statement and then replying at the end of the debate, he interrupted other hon. Member's speeches. It is a mistake for Chancellors to do that, because he was challenged immediately on the figures. Despite his diversionary interruptions, it was clear that he did not know the facts.
That brings me to the economic forecasts, which are published in Table 4 of the Financial Statement. My right hon. Friend the Member for Carshalton (Mr. Carr) pointed out that the table did not cover as long a period ahead as has been customary. In reply, the Chancellor of the Exchequer asked my right hon. Friend:Will the right hon. Gentleman not agree that the estimate made by the Conservative Government last year was wildly and absurdly inaccurate because in the first quarter of this year, owing to the unnecessary three-day week, there has been a fall in manufacturing products ".—[OFFICIAL REPORT, 27th March 1974; Vol. 871, c. 483.]Surely that cannot be taken as a satisfactory answer.
Ever since the right hon. Member for Birmingham, Stechford (Mr. Jenkins) 743 first introduced these forecasts, the House has recognised that they were likely not to be perfect. Indeed, the House has always recognised, even in the absence of unexpected events such as those at the end of last year, that the forecasts would quite likely not be correct, except by chance. But that is no reason for not publishing the forecast.
The Opposition fully appreciate that there are real problems in making such forecasts, not least because the demands are largely determined, with various assumptions, about the supply side. Therefore, there are particular problems at present when it is to some extent the supply side which has been creating the problem with regard to fuel supplies and prices. There is scope for improving the forecast by the use of input-output techniques.
One's task at the Treasury is often made more difficult because forecasts are not always to hand when one needs to make decisions, because they are made only at certain stages of the year. But that is not true at this time of year. The Chancellor of the Exchequer must have the forecasts for the full period ahead, and there is no reason why he should not publish them. It is right that the House should demand to know what those figures are.
I have tabled a priority Written Question which is due for answer tomorrow, asking for the figures, and I believe that the right thing for the Chancellor of the Exchequer to do in these circumstances is to publish them. As I have said, the Opposition fully recognise the limitations, but one must ask—one only has to look at this year's table compared with last year's table to see what is missing, and perhaps the Chief Secretary would care to tell us—why it is that the figures have not been given. What is the Chancellor of the Exchequer afraid of?
I turn to another point which arises from the Budget Statement. The right hon. Gentleman was rather concerned with what one might call myth-making. I consider it important that myths should not be created, not least because the Chancellor may be deceived by his own myths.
There were two myths going round. One came from the Prime Minister when, 744 during the debate on the Gracious Speech, he said:…growth was nothing like the Government's target during last summer and autumn." —[OFFICIAL REPORT, 12th March 1974; Vol. 870, c. 76.]In other words, it would seem that demand was less than we expected.
On the other hand, the Chancellor, during his Budget speech on 26th March, seemed to be saying that the economy was overheated when he said:I must ensure that the pressure of demand in the economy does not get out of control, as it did towards the end of last year."—[OFFICIAL REPORT, 26th March 1974; Vol. 871, c. 291.]If the Chancellor were to study the previous reports of the National Institute of Economic Research—he rested his own case on a later report—he would find that that was not the general view taken by the institute. As I explained to the House some time ago, that was not the situation. But the Government cannot have it both ways. There cannot be a shortfall in demand and a contention that the economy is overheated at one and the same time.
Until the events after October last year, the reality was that the economy was largely on course, and, as my right hon. Friend the Member for Altrincham and Sale (Mr. Barber) said, the level of demand was easing off from a growth rate of approximately 5 per cent., which was mopping up excess capacity, to a level in line with the gross in productive potential. Be that as it may, our need now is to get back on the path of sustainable economic growth, taking into account what has happened as regards the supply and higher price of coal and oil.
The crucial question is: what is the present and future relationship between demand and productive capacity and future changes in demand and productive potential? The failure of the Chancellor to make the position clear on that matter is one reason why the House has understandably found difficulty in deciding whether particular measures are inflationary. The decision rests on the relationship between demand and capacity. The distinction between cost-push inflation and demand inflation is always important, particularly in considering events such as the oil price increase, which is demand deflationary but cost price inflationary, or particular tax 745 changes which are also demand deflationary but cost price inflationary.
That brings me to the fashionable word of the day—"neutrality". There has been great talk on whether the Budget is neutral in demand terms. I am glad to see the Paymaster-General in his place, because I want to take up some of the points he made and say something about the concept of demand neutrality. I am always rather doubtful about some of the dictums of Bertrand de Juvenal, who was probably overstating the case when he said that politics in this country are rather quieter than in America because here people, stand for election whereas in America they run for office. His other dictum—to the effect that there are many ways of being different but only one way of being the same—is more plausible at first than at second sight.
There are many different ways of being neutral. One can put nothing in either side of the scales or a great deal. The result in some sense is still neutral. Therefore, even if one accepts the Chancellor's Budget judgment that this should be a neutral Budget in demand terms, none the less one has a choice how that neutrality is achieved. The Government have decided to go for food subsidies, on the one hand, and taxes to pay for food subsidies, on the other. Of course, one could have chosen to do more on both sides or neither.
As my right hon. Friend the Member for Carshalton pointed out yesterday, and my right hon. and learned Friend the Member for Surrey, East did again today, food subsidies—the principle applies, I believe, to the rent freeze as well—are an inefficient way of helping the weakest members of the community, because much of the benefit goes to those not in need. It requires a lot of money for there to be a comparatively small effect on the retail price index. Over the past couple of days there has been a lot of controversy as to precisely how the effect on the RPI is likely to work out as regards the balance of the Chancellor's measures. The Chancellor's statement said that the food subsidies, for example, will reduce the rise in the retail price index by about 1½ per cent. The Paymaster-General yesterday, speaking without a prepared brief, also said 1½ per cent. I suspect that that figure is the maximum effect likely. The Government 746 admitted at the conclusion of last night's debate that the effect of the food subsidies is more than outweighed by the excise and value added tax increases, with the result that, on balance, there is an increase in the retail price index.
It is clear from the Chancellor's statements about having one hand tied behind his back by threshold agreements that he would have liked to raise the retail price index even more. However, as the debates have proceeded the true extent to which the Budget is likely to increase the retail price index is becoming more apparent. As my right hon. Friend the Leader of the Opposition said this afternoon during the Prime Minister's Questions, we believe that we are entitled to the full figures. With great respect to the Paymaster-General, they were not given last night, and, in particular, the right hon. Gentleman cut off his estimate of the effect on the RPI of the nationalised industries price increases at the end of the year. Clearly, some of them, for example the steel price increases, will still be working through by then.
I turn to two other matters raised by the right hon. Gentleman the Paymaster-General. First, he referred to the effect on the retail price index. He said:I think that on reflection the right hon. Gentleman will confess that the overall effect of the Budget on the retail price index is as favourable as it could be.That, of course, is on the assumption that he is making the choice which the Chancellor made. As I have already pointed out, that is not necessary.
The second point made by the Paymaster-General was that the Budget had to be tough because of the economic situation, and he emphasised that a number of times during the course of his speech. The right hon. Gentleman said:To meet this crisis situation it is necessary that burdens should be borne.He went on to say:If the first step often has to be an increase in taxes, it is an inevitable result of the situation which we inherit on taking office."—[OFFICIAL REPORT, 27th March 1974; Vol. 871, c. 581–8.]As I have already pointed out, there was a choice whether or not one did. The proposition put forward by the Paymaster-General reflects what the Chancellor of the Exchequer expressed back in 747 December—and he apparently still holds the view—that the British people are in a masochistic mood and want to feel that they are suffering. Yet the Paymaster-General says that we are facing an energy crisis and the Budget must be tough; and then he says that we must have a neutral Budget.
The tax increases are the result of the choice the Government have made to increase expenditure. Far from helping to solve our economic crisis, particularly the problem of inflation, they are making the position worse.
I said earlier—I am sure that the House will agree—that it is important to distinguish between cost-push inflation and demand inflation. But I now have some difficulty in reconciling the Government's statements that the Budget is demand neutral and, as they now admit, price inflationary. It turns on their view of the level of excess capacity at present, the relationship between aggregate demand and unproductive potential.
Like my right hon. Friend the Member for Carshalton who opened the debate yesterday, I find it difficult to avoid the feeling that the Budget is, in truth, more deflationary than the Government will admit. I have difficulty also in following the Chancellor's argument about curtailing the money supply and his view of the demand management situation. Monetary and fiscal measures are, in many ways, two sides of the same coin.
I turn now to an issue that has had much publicity in the Press in the last few days and throughout the election campaign; that is, the question of the social contract which, it is said, the Budget is designed to foster. It appears to be a contract on which the Government pay by instalments. But, unlike on a hire-purchase contract, where one gets the goods and pays the instalments later, the Government are prepared to go on paying and paying without the goods being delivered. That is why the Opposition feel that there is need for a statutory prices and incomes policy at present. This need remains paramount, despite all its unattractive features.
Clearly, an effective voluntary prices and incomes policy is greatly to be desired, but it must not be confused with some temporary restraint by particular unions 748 pending the next election. It is surely illusory to suppose that one can seal such a social contract with acts of petty spite such as those which have been included by the Chancellor in this Budget.
My hon. and learned Friend the Member for Solihull (Mr. Grieve) says that particular attention should be given to three of the Chancellor's measures. He cited the aggregation of children's incomes, the share option schemes and the Chancellor's attitude to them, and particularly a point made by a number of my hon. Friends, including my hon. and learned Friend the Member for Solihull, investment income of the elderly—and I stress the word "elderly". Under the proposals of my right hon. Friend the Member for Altrincham and Sale, the first tranche of this, up to £2,000, was charged at the earned income rates; the present Chancellor proposes to cut that to only £1,500. These are elderly people who have saved and are living on fixed incomes. They have suffered more than anyone from inflation, and they ought not to be clobbered in this way. Again, to suppose that doing this kind of thing is likely to produce results in terms of a social contract is illusory and, I believe, contrary to what the right hon. Gentleman professes, socially divisive.
I turn to the forecast figures in the Financial Statement. Why is the Chancellor afraid—I do not think that one can put it any other way—to publish these figures? The officially published figures have never included figures for money, wages and prices, for understandable reasons. But they do, of course, show how the Chancellor of the day and the Exchequer expect the real resources available to increase through time, and it is out of that overall increase that future increases in real incomes and, particularly, real wages are to be paid.
Therefore, I believe that we are entitled to ask, subject to all the qualifications that I have mentioned and that we accept, what the Chancellor thinks, as a result of his Budget, the increase in real incomes and gross domestic product will be in the first half of 1975, because this is very relevant to the position in the next pay round beginning in the autumn. We are entitled to ask for these figures to be given.
749 Finally, I want to make one or two basic propositions to the Chancellor. The case which we have made repeatedly—it is a simple one—that Socialist Budgets increase taxation and Conservative Budgets reduce it, is proved once again by this Budget, and the fact of the matter is that the money necessary to finance plans of the kind put forward by the Government cannot he found, in the right hon. Gentleman's elegant phrase, by soaking the rich. We all know perfectly well that the measures hit the broad mass of taxpayers. This is what has happened on this occasion and is what we predicted would happen.
We also need to repeat once again that, even if one accepts the Chancellor's judgment that this is a neutral Budget in demand terms, there is still a choice as to how one achieves neutrality. We are threatened by the Chancellor with a second Budget later in the year. It is worth pointing out that the last time a Labour Government had two Budgets in a year, in 1968, they put up the taxes on tobacco, wine, spirits and petrol and increased purchase tax both in April and November. One Budget like this is enough, and I believe that the House and the country should be warned against proposals of the kind that the right hon. Gentleman has put forward.
§ 9.30 p.m.
§ The Chief Secretary to the Treasury (Mr. Joel Barnett)
We have had a very interesting debate today, during which we have heard eight maiden speeches—rather a lot for one day's debate. They began with a remarkable maiden speech by my hon. Friend the Member for Coventry, South-West (Mrs. Wise), who spoke entirely without notes. I am sure that the House must have been impressed by her speech.
The hon. Member for Gosport (Mr. Viggers) showed us again that one learns something every day. We learnt from him that it is Portsmouth that is near Gosport rather than the other way round.
We then heard from my hon. Friend the Member for Walsall, South (Mr. George). I was delighted to hear his endorsement of the Budget—he is obviously a very intelligent new Member. He replaced Sir Harry d'Avigdor-Goldsmid, who was a very popular Member of this House. Sir Harry 750 congratulated me on my maiden speech nearly 10 years ago, and his remarks were well received on that occasion too.
We then had a speech from the hon. Member for Tonbridge and Mailing (Mr. Stanley). I did not hear it but I am told by all who did that it was very good—controversial of course, but I do not think nowadays that a maiden speech is any of the worse for that. The sooner one gets started, the better. Then there was the hon. Member for Reigate (Mr. Gardiner). We have known him before from the Press Gallery, and perhaps the best I can say for him is that I hope his speech will be well reported.
My hon. Friend the Member for Glasgow, Maryhill (Mr. Craigen) was another maiden speaker. He again replaces a well loved Member of the House, Willy Hannan, who many of us remember with a good deal of affection. The hon. Member for Mid-Sussex (Mr. Renton) talked about his constituency as the Garden of Eden. Knowing a little about Mid-Sussex I cannot help agreeing with him. It is a wonderful area, although the hon. Member told us that he had problems. Those of us representing built-up industrial areas might well think "Oh for such problems!"
Finally there was the hon. Member for Arundel (Mr. Marshall), who represents another delightful area that is not well known as a safe Labour seat. He told us that he has many pensioners in his area. Naturally, like his pensioner constituents, he will be highly delighted with what my right hon. Friend has done. He requested an earlier retirement age, and there are times in the Treasury when I would endorse his remarks in relation to our predecessors.
§ Mr. Barnett
I was talking about my predecessors. I am sure that the House looks forward to hearing all those maiden speakers again soon. Their speeches were well worth listening to.
I turn to the speech of the hon. Member for Worthing (Mr. Higgins) and thank him sincerely for his good wishes. I much appreciated them because my speech tonight is my maiden speech as a Treasury Minister. He raised the question of representations made by the food manufacturers, the motor agents and many others.
751 I can assure him that I shall be giving urgent consideration to those representations at the earliest possible moment. He will appreciate that it will probably have to wait until tomorrow morning.
§ Mr. Higgins
This was a reference to a report in the Press this afternoon about the tobacco, wine and spirit and beer traders and others who apparently did not have adequate consultation and notice over the question of amending the price code in relation to indirect tax changes. I hope the hon. Gentleman will give me the assurance that no decisions or orders will be made until that consultation has been held, with adequate preparation and notice.
§ Mr. Barnett
I can assure the hon. Gentleman that the notification order relieving manufacturers of the need to pre-notify was made on Budget Day. I can also assure him that those who have not yet had the opportunity of making representations to us will be given that opportunity.
The hon. Member put many questions to me. He will realise that I have a great deal of ground to cover. My right hon. Friend the Chancellor has asked me to deal with much this evening. I hope that the hon. Member will not mind if I do not deal with all the questions he raised. I know that the Chancellor will be happy to deal with them on Monday evening. I am pleased to say that I won a bet concerning the hon. Member today. I said that he would talk about cost push and demand pull. He was reverting rightly and very well to his former days in Opposition. I am happy to see him settling down so well.
I want to say a word on defence. In conformity with our policy directed to maintaining a modern and effective defence system, while reducing its cost as a proportion of our national resources, we have set in hand a thorough-going review of our defence commitments and capabilities. Meanwhile we have already decided to make a further cut of £50 million, at 1973 prices, on defence expenditure for 1974–75, in addition to the £178 million announced by the previous administration in December. Taking into account all the cuts announced by the last Government last year, the total reduction on the previously planned 752 defence programme for 1974–75 is about £300 million at 1973 prices.
I know that some of my hon. Friends would have liked us to go further. In carrying out our review, however, as my right hon. Friend the Chancellor of the Exchequer told the House on Tuesday, we shall be assessing how best to achieve the required balance between continuing to meet essential defence needs while securing a necessary reduction in the proportion of our resources we devote to defence. We shall be taking a very careful and systematic look at our commitments and capabilities, individually and as a whole, and consulting our allies wherever their interests are involved. Clearly we cannot do this in only three weeks of government, but we shall be pressing ahead with this review, and my right hon. Friend will be announcing the results later in the year.
I turn now to value added tax. My right hon. Friend mentioned in his Budget speech that we will be bringing forward orders to zero-rate for VAT essential aids for the disabled and certain protective clothing. There are already a wide range of reliefs from VAT for aids for the disabled. All aids supplied through the National Health Service are effectively outside the scope of the tax. In addition, all goods supplied by pharmaceutical chemists on a doctor's prescription are zero-rated. Then there are the wide powers for local authorities to supply aids to the disabled under the Chronically Sick and Disabled Persons Act—the "Alf Morris Act" as so many of us remember it. Under the provisions of Section 15 of the 1972 Finance Act local authorities can reclaim all VAT paid on their purchases of such aids. Nevertheless there remain a number of distressing cases where VAT is applied to essential aids for the disabled. We feel it is only right to extend the VAT reliefs into these fields.
My right hon. Friend the Chancellor mentioned in his Budget speech kidney machines and invalid chairs. We also intend to zero-rate other items, such as electrically and mechanically adjustable beds specially designed for invalids, Nelson and similar combined knives and forks for use by one-armed persons, and domestic chair lifts and stair lifts for use with invalid chairs. These are all items 753 for which the hon. Member for Worthing will know we have been pressing for many years.
Protective clothing is another field where we believe that relief is justified. Of course, where employers purchase protective clothing for their employees the VAT on the purchase is input tax, deductible subject to the normal conditions. But where employees purchase their own protective clothing, the tax burden at present falls on them. This is an anomaly which we intend to rectify.
Naturally we need to examine this whole question in some considerable detail, but I can assure the House that we shall do so as quickly as possible. I cannot say today exactly when the necessary order to zero-rate these goods will be laid, but the zero ratings will be effective at the latest by 1st June.
I should next like to refer briefly to Ways and Means Resolution No. 10. The need for this has arisen because a recent decision of the London VAT Tribunal has upset the arrangements for applying VAT to television rentals in cases where the rental agreement was made before 27th July 1972—that is, before the date of Royal Assent to the 1972 Finance Bill. These arrangements were discussed at some length in the debates on the Bill. The original proposals of the Conservative Government were amended during the debates, but I think that the intention of the Act as finally passed was quite clearly understood on both sides of the House.
The tribunal's judgment would create anomalies that were not intended. Although the Commissioners of Customs and Excise have appealed against the decision, we think it is desirable immediately to restate and put beyond doubt the position that was then intended. The forthcoming Finance Bill will therefore include a provision to that end, with effect from 1st April 1973, the date when VAT came into operation.
I come next to our predecessors' proposals for taxing land gains. Of course, the real way to stop huge profits on the sale of land is to take it into public ownership at its current use value, but this will have to wait for our Bill to reach the statute book. Until that time, we intend to make sure that gains are fully taxed. We still take the view that 754 these proposals do not adequately deal with the whole problem of land and property taxation, but they partially deal with the problem and we have decided to adopt them with a number of modifications, at any rate as an interim measure. The Finance Bill will contain the necessary legislation.
There has, I know, been concern at the lapse of time between the announcement of the scheme and the publication of the detailed rules. I would have liked to have been able to tell the House that the proposed legislation could be published well in advance of the Finance Bill or at least to have been able to offer an explanatory statement on certain matters of detail. In the time available since the election, however, it has just not been possible to take the drafting of the legislation far enough, and I am afraid that I shall have to ask the House to be patient for a few more weeks when all the details can he considered in their full context. For the present, I shall confine my remarks to the necessary announcement of the rates to apply to development gains in certain special cases.
First on rates, there is clearly a need for a special rate for the trustees of discretionary and accumulation trusts, and we have decided that the rate should apply to all trustees—other than bare trustees—of settled property since development gains will frequently not be distributable even in the case of ordinary life trusts. The rate will be the same as that applicable to the income of discretionary trusts; that is, 45 per cent. for 1973–74 and 48 per cent. for 1974–75. If, of course, the gains are distributed, the beneficiary will be given credit for the tax paid by the trusts.
It is also right in our view to adopt a special rate for development gains of life assurance companies in so far as they are allocated to policy holders. The rate will be 37½ per cent. for both years; that is, the special so-called pegged rate which applies to the ordinary investment income so allocated.
On pension funds, we take the same view as our predecessors and think that to exempt them entirely would put them in an unduly favourable position in the property market in which they are already substantial investors. We propose, however, to charge their development gains 755 at the 37½ per cent. rate I have just mentioned. I should like to add the assurance that this Government have no intention of restricting the funds' existing exemption in any other respect.
I deal now with the taxation of foreign income. I should first like to give the House some more details about the changes we propose regarding the taxation of foreign incomes and to which my right hon. Friend the Chancellor referred in his speech. Of course, not everyone with foreign income sought to exploit the remittance basis, but there is no doubt that it had developed into a major loophole for tax avoidance.
What the new position amounts to is this. The man who goes abroad to do a job will be assessed to tax on his earnings from the job whether he does this as a director or employee or on his own account or as a partner in a foreign partnership. Whether he keeps part of these earnings abroad or sends part of them back here will be of no significance for tax purposes. This is surely right. But the special considerations applying to incomes of this kind are to be recognised by the giving of an allowance in assessing the earnings to tax. This will take the form of a deduction of one-tenth from these earnings before they are charged to tax. In this way people will not be deterred from taking on foreign jobs, but they will at the same time pay their proper share of taxes here—their country of residence. This partial exemption will apply also to pensions arising abroad.
§ Mr. Peter Rees (Dover and Deal)
What happens if the person going abroad genuinely has dual residence—in the country where he is doing the job and in this country where he has a house which is not disregarded? Will he be the subject of favourable treatment?
§ Mr. Barnett
That is a highly technical point, and I am sure that the House would prefer me to look into it later.
Where a man goes abroad to do a longterm job and therefore has to be away from this country for long periods at a time, we propose to be more generous than the existing law. This man is in a quite different position from the man who lives here and goes abroad to work for comparatively short spells. We propose that the earnings of the man who goes 756 abroad to do a job for long continuous periods should be excepted altogether from the charge to tax. We believe that a continuous period of 12 months abroad is a fair and justifiable dividing line. Where a man has been away from the United Kingdom for this period, outright exemption on the earnings of the foreign job will be given. Unlike the rules governing what constitutes residence for tax purposes, the 12-months period will not be linked to the tax year.
This brings me on to the foreigner who lives here. The foreigner who works here for a British concern pays tax on his earnings here in the normal way. This is at is should be. But if he works here for a concern which is itself resident abroad, he is liable to tax on the remittance basis and this sometimes—too often, we have found—has the result that he pays very little tax here, sometimes none at all. This tax privilege is to go.
We recognise, however, that the foreigner who comes here to work for two or three years or so for the overseas company which employs him is not in quite the same position as the man whose connection with this country is more permanent. For example, his family may still be in his home country, he may be educating his children there and so on. We propose that he should be assessed to tax on one-half of his earnings. We think this a fair compromise between paying no tax at all at the one extreme and paying tax on his full earnings here at the other extreme.
What of the man who lives here year in, year out over a long period of time? His roots are now here and we think he should therefore pay tax here on his income, of whatever nature and wherever it arises, in the same way as the person who is domiciled and ordinarily resident here. This is what we propose for the tax year 1976–77 onwards. The Inland Revenue will look at his position to see whether he was ordinarily resident here for five out of the six preceding tax years. If he was, he will be treated for income tax and capital gains tax for that year as if he were a United Kingdom native and he will be charged to tax on the basis of his world income and capital gains.
We think that these proposals are fair to all those affected by them and to the 757 country. Except for some minor categories of income, which I need not go into now, the remittance basis of taxation will disappear. It has become obsolete in this day and age of high-speed international travel and multinational companies, and its demise will be mourned only by those who have benefited from the tax privileges it conferred. We all know of the Lonrho case last year. The Leader of the Opposition should at least be pleased that we have removed one of the unpleasant and unacceptable faces of capitalism.
On age exemption, I should inform the House that there is to be an amendment to Ways and Means Resolution No. 13. We have recalculated the income limits and find that we can increase them from £700 to £810 instead of £785 in the case of a single man and from £1,000 to £1,170 instead of £1,130 in the case of a married couple. An amended resolution giving the higher figures will be tabled tonight.
I turn now to the wealth tax. In announcing his intention to publish a Green Paper about the annual wealth tax, my right hon. Friend made it clear that the Government are committed to the introduction of such a tax. The Green Paper will not therefore be directed towards discussion of whether this reform is desirable. We will have a wealth tax. But, because it will be a new departure in this country, we have decided that we can better frame this legislation if its introduction is preceded by public discussion of such questions as the starting point, the rates at which it should be levied on successive slices of total wealth, its relationship with other taxes and how the various administrative problems to which it will give rise can best be resolved. I cannot tell my hon. Friend the Member for Ashfield (Mr. Marquand) whether there will be a Select Committee, but the point he made will be considered.
It should be understood by some of my hon. Friends, who were perhaps a little disappointed that the wealth tax was not introduced immediately, that the introduction of the capital transfer tax with effect from Budget Day will ensure that attempted transfers out of the tax net before the wealth tax begins to operate are likely to prove very costly.
§ Mr. Nicholas Ridley (Cirencester and Tewkesbury)
At what rate will the 758 capital transfer tax be levied? It seems extraordinary to give notice of a tax without saying how it is to be structured or what rates will be applied.
§ Mr. Barnett
I was just coming to precisely that point.
I should like to expand on what my right hon. Friend said in his Budget about the new tax on capital transfers. This will apply, subject to certain exemptions for small amounts, to all transmissions of wealth, whether made by way of gift during a person's lifetime or by way of property passing on his death, except that we shall wish to consider how far we might go in relieving transfers between husband and wife.
The rates and basic exemption limits for the new tax are matters to be fixed in the autumn. I should not wish now to be committed to any statement of what those limits should be. For immediate purposes, however, it may be taken that there will be exemption for gifts made in the period from Budget Day to a date to be fixed in the second Finance Bill on the lines now provided for estate duty. Any gift made in this period, which would not be chargeable to that duty if the donor died on the day after the gift was made, will be exempted from the new charge on gifts. But I would wish to make it quite clear that these limits will not necessarily apply later.
The charge will be at progressive rates charged on the cumulative total of gifts made during a person's lifetime with the further final cumulation of property passing on his death. The tax will be the primary liability of the donor or, after his death, his personal representatives and will, of course, apply to gifts he makes in settlement as well as other gifts. Moreover there will, in general, be a charge on all capital taken out of a settlement and on any change of beneficial interest in possession in a settlement, not only, as now, where linked to a death.
Trusts have in the past been widely used to avoid the present estate duty and the legislation will be designed to ensure that abuse is no longer possible. In particular we shall consider the possibility of imposing a periodic charge—say every 15 years—to tax on the capital of discretionary and accumulation trusts. The 759 liability to pay the tax charged in respect of settlements will fall on the trustees in that capacity. I should perhaps make it clear that there will be no question of deferring payment of the new tax until death but we shall aim at reasonable arrangements for collection after gifts have been made.
§ Sir Geoffrey Howe
To return to the point made by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), is not the hon. Gentleman purporting to give notice now of an intention to introduce in a conceivable further Budget this year a range of legislation covering a whole range of variable options as to scope, size, rate and everything else? Is not this something that the House should look at very critically, because it is a remarkable piece of prospective retrospective legislation?
§ Mr. Barnett
The right hon. and learned Gentleman will have an opportunity to look at it when the Finance Bill comes forward. It will be my right hon. Friend's second Budget and he will have many more to introduce. The House will have a chance to discuss it.
§ Mr. Barnett
No, I cannot give way. I have too much to deal with which the House will want to hear.
I should like now to turn to the disallowance of interest and my right hon. Friend's proposal to disallow income tax relief for interest payments on personal borrowing, except for certain purposes, and to limit excessive tax relief for mortgage interest. These proposals begin the process, to which we on this side of the House are pledged, of stamping out tax avoidance and reintroducing a sense of fairness into our tax system.
Of course, relief will still be given on mortgage interest. But no one can doubt that the time has come to impose a limit on the extent to which the Exchequer subsidises the better off. In the future only new loans taken out for the purpose of acquiring or improving the borrower's principal private residence will attract relief on the interest, and only then up to a loan of £25,000. Those who choose to occupy the topmost reaches of the property market will now be required 760 to bear a larger share of the cost out of their own pocket. So too will those who choose to buy second homes. We believe that it is intolerable that the tax system should subsidise the purchase of second homes at a time when so many families find it impossible to get a home of their own at all. I am confident that my right hon. Friend will be applauded for this measure—but nowhere more so than in some of the remoter parts of these islands—[HON. MEMBERS: "Scilly Isles."]—where the effective underwriting of the holiday cottage industry has taken the cost of a home beyond the means of ordinary people. I am glad that this includes even the hon. Member for Cornwall, North (Mr. Pardoe).
I should like to say a word at this point about overdraft interest, since this is the second respect in which we are not returning exactly to the 1969 system. Overdrafts are difficult to fit into any system which depends on the use to which loans are applied. Once an account is overdrawn for any length of time, even if it is sometimes in credit, the original purpose of the overdraft may be lost. We have therefore decided, bearing in mind the diminished use of overdraft facilities relative to other bank loans in recent times, that tax relief on personal overdraft interest should be discontinued. But business overdrafts are not affected.
I hope the House will forgive me for dealing with some points in rather more detail than I should have liked, but questions in Parliament and the Press in the last two days show that even if the Opposition are not interested in these matters, other people are.
We have concentrated on three main areas—pensions, food subsidies and housing. We are implementing a record increase in pensions, and doing so, moreover, three months ahead of the time the previous Government proposed for their increases. There is much more that we shall be doing in the coming months and years when we shall be in office.
Meanwhile we shall continue, as we have begun, to bring about a steady improvement in Britain's economic position, all the time making sure that fairness is the order of the day. The few who have had a tax bonanza during the last four years will know that those days are over, while the many will have seen from the 761 Budget that burdens and future benefits will be fairly shared. I commend my right hon. Friend's Budget to the House.
§ Debate adjourned.—[Mr. Golding.]
§ Debate to he resumed tomorrow.