BUDGET RESOLUTIONS AND ECONOMIC SITUATION

HC Deb 14 November 1974 vol 881 cc651-740

Question again proposed.

6.25 p.m.

Mr. David Stoddart (Swindon)

I begin by congratulating my hon. Friend the Member for Hemel Hempstead (Mr. Corbett) on an admirable speech. I sincerely trust that he will follow the tradition of Hemel Hempstead by being a very long-serving Member. He recalled that his is a new town which has the feudal baron of the New Towns Corporation. As he probably knows, he and I have something in common because Swindon, although not a new town, is an expanding town.

The experience which Hemel Hempstead has had and which my hon. Friend has so ably described will confirm the wisdom of those in Swindon who insisted on getting control of their own expansion and not handing it over to someone else. I shall send copies of my hon. Friend's speech to people in Swindon so that they know that they did the right thing. His speech was moving, forthright and knowledgeable. We all enjoyed it and I sincerely hope that we shall hear much more of him in the future.

I agree with the hon. Member for Cornwall, North (Mr. Pardoe) in his condemnation of the Conservative Party. Certainly Conservative Members have short memories, thick skins and all the cheek of old Nick. They were in office only eight months ago yet they now have the nerve to criticise my right hon. Friend the Chancellor of the Exchequer and the Labour Party for not solving all our economic difficulties and being able to overturn the Conservative Government's absurd economic policy within eight months. It is a truly hypocritical attitude. The extent of the hypocrisy was shown by the right hon. Member for Carshalton (Mr. Carr) in his speech to the House Yesterday and in his television broadcast last night.

For example, the right hon. Gentleman said that during the summer the Conservatives had pressed for a measure to extend tax relief for all old-age pensioners—that is, instead of the age exemption limit. That claim of his is remarkable because I made the same proposal to Mr. Anthony Barber, who has now scampered off to the City, leaving the present Government to clear up the mess. He turned the suggestion down on the ground that the Treasury could not afford it and that it would be socially inequitable. At the same time Mr. Barber was handing out big tax reliefs to surtax payers.

Nothing can be more hypocritical than to say when one is in Government "We cannot do it because we cannot afford it and it would be unfair" and then press the same proposal on the next Government when one has been in opposition for only about three months. That is the sort of thing that brings politics and politicians into disrepute. I hope that we shall have a better display of memory from the Conservative Party in the months ahead.

I now address myself to my right hon. Friend the Chancellor of the Exchequer I understand that in the present circumstances the Budget is a reasonable one, and that he has probably done what is necessary at this stage—with, that is, the instruments he has to hand. But I have to say to him that many of us will expect the Government quickly to bring forward new proposals for new instruments that we in Parliament can forge for them so that Government help to industry can be more selective and more related to the over-riding national interest than to the particular industry interest.

The social contract has been much derided and spat upon by the Conservative Party, unjustly, unfairly and, I believe, to the detriment of the country. I thought my right hon. Friend's broadcast was excellent. I heard his strictures to trade unionists, when he said that it was easy enough to use the bludgeon and to strike to get what one wanted.

But the Government must not expect the social contract to work overnight. I want them to remember that over a period of years the working people have been set by the Conservative Party an example of market forces. It has been a bad example. It has taught them that if they brandish their fists and use the bludgeon they will get what they want. They have been taught jungle economics by Conservative Members. We can hardly blame working people, when they see land speculators and others using a shortage situation to push up the price of houses beyond the reach of the majority, for doing exactly the same to their employers in a similar situation. That is the market economy that they were taught by Conservative Members. I tell my right hon. Friend not to expect that example to be overturned overnight.

What we now need and what we are getting from the Government is a new lead, a new concept of how the country is to be run. We are being shown a new concept of how people can work together rather than compete against each other. I believe that over a period the working people, who are decent people with sound common sense, will respond to such leadership and that we shall have wage settlements related to what the country can afford and to what employers can afford to pay.

I now turn to energy. I agree with the hon. Member for Cornwall, North. I remind Conservative Members that it was they who started the nationalised industries on a downward path to financial ruin. I can remember speaking on the Statutory Corporations (Financial Provisions) Act and warning exactly what would happen. I can remember saying to my party that if we voted for the Bill we would be voting for disaster for the nationalised industries and giving Conservative Members a stick with which to beat the Labour Party during elections. We cannot in an energy shortage subsidise the waste of energy. That is precisely what we are doing, and unless the Chancellor acts as he says he will we shall continue to do so. It is nonsense to continue with such a policy.

In many instances we are wasting 90 per cent. of the subsidised heat value sent out of power stations and other installations. We should be thinking along the lines of subsidising energy conservation. I notice that in the industrial sector the Chancellor has done exactly that. We must not deny or try to hide the fact that the additional bills for ordinary people will be very high. If we wish to conserve energy, we must transfer some of the money which will be saved into assisting people to conserve energy in their homes. At least 50 per cent. of British houses have no roof insulation and 30 per cent. of the heat introduced into them is lost through the roof. I urge my right hon. Friend to take action—for example, through the improvement grant system—to assist people to conserve energy in their homes.

My third point is that of getting additional production from industry. It is true, as the Chancellor recognised, that we need to move money into investment. We also need to move people back into industry. In last week's Sunday Times it was pointed out that there has been a 29 per cent. increase in the number of non-productive workers over the past 12 years. Whereas in 1962 there were 250,000 more productive workers than non-productive workers, we now find that there are 1,750,000 more non-productive workers than productive workers. When we go out to buy British goods in the shops it is little wonder that we are so often told that we shall have to wait, six, seven or eight weeks for delivery. Because we do not want to wait that long, we buy Japanese or German goods. That is one reason for my urging my right hon. Friend to consider introducing a measure that will act as an incentive for more employment in manufacturing industry or will act as a deterrent to more employment in service industries. That also applies to Government and local government service. They are important but they are the sectors in which the main increase in employment has taken place.

To a large degree that has happened because of the ridiculous reorganisation that took place under the last Conservative Government. We are entitled to expect efficiency from local authorities and Government Departments in exactly the same way as we expect efficiency from private industry. If we wish to achieve such efficiency, it may be that we should have consultations with the local authorities and relate manpower use to the rate support grant.

I am glad that my right hon. Friend did not give in to the whinings and groanings from the CBI to reduce corporation tax. The argument that is used is that industry must have additional cash flow through lower taxation. That will not wash. In my constituency we have a firm by the name of Plessey. Last year it made a profit of £40 million. We are told by Conservative Members that firms need profits so that they can provide employment. Plessey made £40 million profit but over the past three months it has made redundant 1,200 workers in my constituency. There seems to be little relationship between profit and employment in the Plessey organisation. I hope that the Chancellor will continue to ignore the CBI until it can act in a responsible and pro-British manner.

Mr. Heseltine

I hope that the hon. Gentleman will at least warn his constituents that if they ignore the CBI more of them will be unemployed.

Mr. Stoddart

In fact, they will not be. That is incorrect. I should like to be able to advise the Government to take notice of the CBI. I shall be able to do so when it grows up and gets down to the real problems now facing us. When that happens, I am sure that everyone will take notice of the CBI. At the moment it is a body which should have no influence at all.

I wish the Budget well. I trust that the Government will come forward with further measures to enable us to get out of the real economic difficulties which were left with us by the last Conservative Government.

6.38 p.m.

Mr. Michael Alison (Barkston Ash)

The hon. Member for Swindon (Mr. Stoddart) said that he would range fairly widely. He did so, and he touched on one subject that is the topic which I want to pick out from his speech and take up—namely, the social contract. I shall approach it by way of unemployment. It seems to me that unemployment is the most fascinating hidden factor in the Budget. I cannot quite make out whether it is the dog that did not bark or whether it is barking loudly. The fact is that the dog is there and that it is relevant to the social contract.

I draw the attention of the House and the hon. Member for Swindon to the significance of unemployment in the context of the social contract. I refer to a key passage in the Chancellor's speech which I have trawled up rather like my right hon. Friend the Member for Finchley (Mrs. Thatcher) trawled up a significant passage. In the context of unemployment and the social contract, the right hon. Gentleman said: Moreover, if wages rise beyond the limits set by the TUC, the Government will he compelled to take offsetting steps to curtail demand. And the effects on the financial position of the company sector are bound to lead to unemployment, as Mr. Jack Jones pointed out …".—[OFFICIAL REPORT, 12th November 1974; Vol. 881, c. 249.] I hope it will not be lost on the House that the factor of unemployment is, as it were, the guard dog of the social contract.

It is interesting to reflect on how prices and incomes policies have evolved in the last 10 years. The House will recall that they started with a system of voluntary prices and incomes policies which was tried and found wanting. We then moved over—both major parties and, I think, the Liberal Party too—to a statutory prices and incomes policy, and that was found wanting. Evidently the two major parties have now discarded statutory prices and incomes policies. So we have come to what is called the social contract.

The social contract is clearly not a statutory form of prices and incomes policy. I think that the hon. Member for Swindon and the Minister of State will follow me there. But I suspect that it is also clearly not a voluntary species of prices and incomes policy. One only has to refer to the guard dog factor of the Chancellor dangling unemployment as the coercive factor in the situation for it to become evident that it is not a voluntary form of prices and incomes policy.

Therefore, what we have come to is the abandonment of a prices and incomes policy and the return to the traditional, classical governmental rôle of managing the economy by managing the level of aggregate demand. It is evident that if unemployment is to be brought in as a governor, a sanction, in the management of the social contract, it is the same as saying that the Government are going to bring in the weapon of aggregate demand management to control the economy. In other words the Government have at a stroke, in the Chancellor's speech, destroyed the significance of the social contract.

This can be demonstrated by a very simple test and I hope I take the hon. Member for Swindon with me. Suppose that the social contract guideline is observed in terms of wage settlements in those areas where the social contract can be monitored. So far so good. The social contract has been observed. Everyone is happy—or are they? Suppose also that actual earnings due to wages drift or other unobserved factors or devices increase the level of incomes way beyond the social contract guidelines, but covertly, imperceptibly, unobserved and, therefore, unmonitored and unregulated, but nevertheless in such a way as to increase the real pressure on resources, the rate of inflation, the real movement of forces in the economy. Does it follow that, simply because overtly the social contract guideline has not been breached as far as anybody can see, the Chancellor will not have to act upon the level of aggregate demand? It is ludicrous to interpret his words which I quoted to mean that he will only act upon it if the social contract has been overtly breached but not if it has been covertly breached.

If, for whatever reason, real forces are unleashed in the economy in terms of wage drift or increasing inflationary pressures, it is clear from what the Chancellor has said, whether or not this is occurring within the terms of the social contract, that he is going to act by the traditional methods of regulating the level of aggregate demand.

Mr. Stoddart

One accepts that all Chancellors will try to regulate aggregate demand, but is the hon. Gentleman suggesting that wage drift does not exist when one has a statutory policy? Has he not had experience under previous statutory policies of wage drift taking place in exactly the same way—perhaps by a different means, but nevertheless a wage drift existed and it had its effect on the economy? Does not the hon. Gentleman agree that the social contract offers people a choice, and does he not think that that is a good thing for the Labour Party to try to do?

Mr. Alison

I do not think the hon. Gentleman has taken the point. My point is that in every form of statutory prices and incomes policy that we have had hitherto, because monitoring is so difficult, because the holes in the net are so multiple, diffuse and diverse, leakages have occurred. Whatever the outward form of presentation of the guidelines, imperceptible pressures have arisen when aggregate demand has been at the wrong level. Imperceptible forces have operated: wage drift, false promotion, false job specification and other devices of a false nature to get round the social contract or the prices and incomes policy.

If the Chancellor says that he is going to act through regulating the level of demand, which is what he said in the speech from which I quoted, the relevance of the social contract—the relevance of an overt guideline—has entirely and permanently evaporated. He has made it clear that he is coming back to the traditional classical methods of managing demand in the economy. In this context the social contract has been entirely destroyed by his admission of his return to classical and traditional methods.

If my argument is accepted that the Chancellor has given a clear indication that he is going back to demand management as his key weapon in beating inflation, I ask the House to consider whether he has fully grasped the particular significance of one of the weapons of demand management to which he referred in his speech and which is mentioned in the Red Book. This is the factor of the growth of the money stock. This is profoundly relevant to the issue of unemployment and to the way in which the right hon. Gentleman manages the level of demand in the economy.

I want to refer the House to the simple clear statement in the Red Book—there is a comparable passage in the Chancellor's speech—where reference is made to the money stock. This is on page 5, paragraph 16: During the early months of 1974 the growth in money stock on the broad definition decelerated sharply. It"— the stock of money— is now increasing at a rate well below the growth of gross domestic product in current prices. I hope that Treasury Ministers appreciate the significance of the growth of the money stock increasing at a level well below the rate of growth of the gross domestic product. The significance is simple. One way of measuring and defin- ing the gross domestic product is to multiply the stock of money by the velocity with which that stock of money turns over and, QED, the resulting product—the other side of the equation—is the gross domestic product.

If one of these factors on the left-hand side of the equation, the stock of money, is falling more rapidly than the gross domestic product, unless the velocity is moving in the other direction the chances are that the GDP must in due course, in current price terms, be dragged down. When we have two factors which are both tending to fall in relation to the GDP, the stock of money and the velocity factor—according to Economic Trends for October 1974, velocity is on a downward trend—it must follow that the GDP in current price terms will and must necessarily fall.

So the bald statement that the stock of money is now increasing at a rate well below the growth of GDP at current prices is an absolutely clear and inescapable indication of the direction of the movement of GDP. The first point to make in this connection is the simple one that there is a clear contradiction in the material provided in the Red Book. Whereas the monetary factors I have indicated must suggest a drop or deceleration in GDP, the forecasts in Table I on page 7 of the Red Book show exactly the opposite, namely, an acceleration in the rate of growth of GDP between 1973–75 as compared with 1973–74. One of the forecasts is wrong. There cannot be the monetary factors necessarily postulating a deceleration in the GDP and the forecast on some other basis indicating an acceleration in GDP.

Let us suppose that the figure of 1.5 per cent. growth for 1973–75 given in Table I is correct. This entails and implies an unemployment level of at least 1 million. This was the level of unemployment in 1971 when GDP was increasing at the rate of 1.5 a year. It is at least possible, with higher productivity since, that the same level of growth in 1973–75–1.5 per cent. a year—will imply over 1 million unemployed. If the monetary indicators pointing in exactly the reverse direction, not of growth but a drop in GDP, are to be believed—and I believe that they are the most potent and significant factors—we shall have a much lower level of growth in the economy and a considerably larger level of unemployment, well above 1 million.

The Government must make up their mind as to whether they think GDP will grow with relative money stock and velocity falling, or whether it will drop. Whichever it is, the implications for employment are profoundly significant. Here we have the dog in this rather turgid plot of the Chancellor's speech which is extremely and potently present. I believe that it is there both to bark and to bite. The fact that it has been placed there to do this means that we have come to the end of a voluntary prices and incomes policy and "ear-stroking" and that we have returned to the traditional weapon of management of aggregate demand levels. It looks to me, even in this context, as if the Government do not quite know what they are doing and have probably over-killed.

6.54 p.m.

Mr. Alf Bates (Bebington and Ellesmere Port)

I hope that the hon. Member for Barkston Ash (Mr. Alison) will not mind if, for the sake of brevity, I do not follow all the points he has raised. Many other speakers have mentioned the social contract. Instead I want to look at two points in the Chancellor's Statement. The first deals with the plans to help industry through Finance for Industry and alterations in the Price Code. I know that a number of my hon. Friends have attacked this method of attempting to help industry. They would prefer the Chancellor to use the proposed National Enterprise Board and the planning agreements system to give industry the required stimulus.

I hope that the NEB and the planning agreements system will be introduced quickly and will form a major part of the Government's strategy for industry. We shall not solve many of the fundamental ills or imbalances in our economy and in our industry until this is done. I cannot share the optimism of some of my hon. Friends and others—optimism often shown by the Chancellor of the Duchy of Lancaster—for a blanket and unselective approach to the problems of the economy. That is a view that has not caught up with the current situation.

I am afraid that some people occasionally seem to display a burst of pleasure at having just discovered Keynes. I regret also that there are one or two hon. Members, particularly Tory Members, who so often seem to be pre-Keynsian, if not prehistoric.

Dr. Colin Phipps (Dudley, West)

Dickensian.

Mr. Bates

Despite that and despite the need for the NEB and the planning agreements system, the problems of industry are immediate. Industry requires help now and the tools of the NEB and the planning agreements are not yet available. There are people in my constituency who are on short-time working as a result of the problems in industry. They are being threatened with redundancy. They do not want to wait until we in this House have passed a new Industry Act giving the Chancellor more powers before there is an improvement in their industry. They want to see it now. That is why I believe the Chancellor was right to have taken the steps he has to assist industry.

We also have to examine some of the reasons for our plans for industry and for our industrial policy. These arise chiefly out of an understanding of the changing nature of industry, an understanding of the growing power that a few companies have developed in the past decade or two. It is an understanding that only the Labour Party has. The other parties have not yet come to terms with the situation. Because of the changing nature of many companies, because of an increased need for technology and a consequent need for a larger and stronger organisation—leading to a demand for greater capital investment and a longer period of gestation for that capital investment before products are forthcoming—there has been a move within industry towards concentration into fewer but larger companies.

That is the only way in which many companies are able to protect their investment over that longer period of time. This inevitable change is one of the reasons why our plans for a National Enterprise Board are right. It is inevitable that when companies require large capital programmes, lasting for a long period of time, they will begin to develop into organisations able to protect that capital investment. They need the ability to influence market patterns, prices and the pattern of demand. That is why so many of the prehistoric theories put forward by some Tory Members are so wrong. We can no longer consider ourselves to be in a free market and thus adopt the rather out-dated theories that go with it.

Within large and medium-sized corn-panics with a technological basis there is often a need for direct Government help. Many large companies could not invest over a long period were it not for the Government's backing, and many medium-sized companies, because they do do have the security of being able to dominate their own market, cannot even survive without Government backing. That is why I believe our policies for a National Enterprise Board with planning agreements in these large firms are right.

With the new domination of a few companies over our economy it is important that we should have much stronger social control over that power. But, as a corollary to accepting that a few companies control about half our market, we have to accept that there remains a large area of medium and small industry employing a great many people. The changing pattern of industry which dictated accumulation into a number of large companies also dictated that some companies would be unable to do that. Where organisation is not fundamentally important to a company, where there is not an important technological base, where there are geographical problems or where there is a service or a function that is in the main a personal one, it is not always possible or desirable that the company should grow large.

We have to recognise that there is this large remaining area in our economy of small and medium-sized companies. Those are the companies that have been hit as hard as anybody by the present financial difficulties. Their inability to dominate their own markets has meant a harder time for them than for the large companies when cash flow is short, as it is now.

Typically, many of the smaller and medium-sized industries are service industries to the large conglomerations. When large industry begins to cut back on investment and on buying those smaller service industries will be affected much harder. As there are so many people employed within those industries, and as such a large part of our output still is produced by them, we need also to create the right economic environment for them. But we did not intend the National Enterprise Board or the planning agreement system to operate on the scale of so many small and medium-sized companies. Therefore, something else had to be done. For that reason also the Chancellor was right to take the action he has taken through FFI and alterations in the Price Code. Whether the action is at the right level is open to question.

Economically, I do not have behind me as many advisers as has the Chancellor and, therefore, I conclude that he is more likely to be right than I am. Politically, as the plans have been attacked as totally inadequate by the CBI, and as a complete sell-out to the CBI by some of my hon. Friends. I also conclude that it is probably at about the right level.

I come to the public spending item. One reason for the imbalance in our society is that whenever we have faced any difficulty we have constantly cut back on public spending. We have used public spending as a reaction to economic events rather than planning public spending over a period and making more use of fiscal measures. We still have far too many schools in need of replacement or improvement. We still have far too many depressed areas lacking basic facilities. We still have far too few recreational facilities in our new and expanding towns, leading to a tremendous problem with young people. At the same time, there are still far too many areas of luxury spending. It is still a bit too easy to be able to buy a yacht. While the other areas are in such desperate need, that is something which we shall have to alter.

We cannot have a massive expansion in public spending at this time, but we must ask ourselves whether a level of 2¾ per cent. is enough. Many local authorities will need more than that simply to stand still. As many capital schemes have already been approved and cannot be cut back, what will happen is that most local authorities will start cutting back, for example, on the number of teachers they employ or on provision for the youth service. That would be short-sighted and tragic.

As to the attitude of the Opposition, we heard today from the right hon. Member for Finchley (Mrs. Thatcher) and yesterday from the the right hon. Member for Carshalton (Mr. Carr)—indeed, I unfortunately caught a brief glimpse of him on television. They suggest that this 2¾ per cent. is too much. On television the right hon. Gentlematn said that we should cut right back on Government spending and that next year there should be no increase at all.

However, he informed television viewers that we should give more for pensioners and the blind. That is because he knew that the blind were listening to him and many pensioners would be watching him. If he wants to give more to these people, although he believes that there should be no increase next year, exactly where will the cuts come? That question was asked of the right hon. Member for Finchley this afternoon, but she did not tell us. The Conservative attitude is a fraud.

I should not object to the Chancellor being bolder on this aspect of his Budget. I would not object to paying more for my pint of beer or my Christmas whisky in an attempt to allow local authorities to spend a little more next year on education, the youth service, and so on. The Chancellor could have been bolder here, and many of us will be watching for the precise details of the White Paper on public expenditure to ensure that essential services are not cut down.

7.9 p.m

Mr. Charles Fletcher-Cooke (Darwen)

I congratulate the Chancellor of the Exchequer, in his absence, on one thing he did not do in the Budget. It is something he must have been tempted to do and which he was under great pressure to do, but he resisted that temptation. He did not impose upon us varying rates of value added tax. Multi-rate VAT is one of the most appalling prospects that the country faces. The pressure upon the Chancellor is great because of the cry for selectivity, for clobbering the goods and services which are regarded as morally sinful, and to encourage those which are morally to be praised. This attitude runs deep in certain political quarters.

But the Chancellor has resisted that temptation with the single exception of petrol, which in any case is rather different. He will have the thanks of the multitudinous traders and small businessmen who already spend much of their time filling up forms. If these people had to fill up VAT forms involving differential rates, they would be spending not only all their Sunday mornings but all their Sunday afternoons as well doing it. They already spend most of their Sundays on this work with only a uniform rate to contend with.

When we come to what the Chancellor did, we find that the craze for selectivity which is now fashionable, particularly below the Gangway on the Government side of the House, got the better of him. It got the better of him because he dared not do what he should have done, which was to have made a straight cut in corporation tax and a simplification of the Price Code. That would have caused a much greater spurt and injection of hope and confidence than will the complicated method in which he has distributed money towards helping small and medium sized businesses.

With regard to the Price Code, the joy with which small manufacturing firms must have greeted the Chancellor's speech must have been modified when they read about the productivity deduction. The complications of this are such that not only will Sunday afternoons have to be spent in working out what people are likely to get, but it will also be a long time before they get anything at all.

The Chancellor stated that in firms where labour costs are between 15 per cent. and 35 per cent. of total costs, the productivity deduction will be subject to the 20 per cent. rate, but a firm with 80 per cent. labour costs will be subject only to a 9 per cent. rate while for one with 5 per cent. labour costs the rate will be 35 per cent. Those are only examples. There is a sliding scale in both directions, and it is such that it will be weeks and even months before accountants on both sides of the barricade have got the matter sorted out and know what the position is. That is a relaxation of the Price Code that is supposed to bring tremendous and immediate psychological uplift to firms with desperate cash flow problems.

Another example of the operation of this fashionable selectivity can be found in corporation tax. What the Chancellor had to say about this was such that even HANSARD recorded that the House dissolved into laughter. The Chancellor said: I therefore propose that for tax purposes companies should have the right to reduce the closing valuation of their stocks and work in progress for the accounting period which ended in the financial year 1973–74—on which their current tax bills are based—by an amount by which the increase in the book value of stocks and work in progress exceeds 10 per cent. of the trading profits of the business in the same accounting year.—[OFFICIAL REPORT, 12th November 1974; Vol. 881, cols. 262 and 264.] That was followed by "[Laughter.]".

Why was there laughter? There was laughter because everybody knows—even the large firms to which this applies—that it does not apply to the small or medium-size firms, and that it will take at least six months for firms to find out where they stand. What sort of boost and hope of confidence will that produce?

Small and medium-size businesses have no cash flow to fall back on. Their bank accommodation has been exhausted and they are in desperate straits. The good intentions which the Chancellor has towards them will not be felt in six months, or even in a year or two years, despite what he promises. They get nothing this year because of the magic figure of £25,000 minimum for closing stock. At the moment these businesses want help, hope and confidence. They do not want complicated rules or sliding scales by which they may get something back, after immense arguments, in about two years' time.

It is a thousand pities that the Chancellor's good intentions have been ruined and have been sacrificed on the altar of selectivity, the principles of which are very strange but which appear to be the only weapon at present available to the Chancellor. Straight reductions across the board would have been easy to administer, to understand and to work, but they are ruled out because of the dogmatic objections of the Chancellor's hon. Friends below the Gangway.

7.16 p.m.

Dr. Colin Phipps (Dudley, West)

I join with other hon. Members who have congratulated my hon. Friend the Member for Hemel Hempstead (Mr. Corbett) on his maiden speech. I have known him for some years, prior to his coming to the House. I am glad that he has been able to display his qualities to us today. I look forward to hearing him in the future and I trust that he will retain his seat for many years.

I hope that the hon. and learned Member for Darwen (Mr. Fletcher-Cooke) will forgive me if I do not follow his remarks, as I wish to refer in particular to three aspects of the statement by my right hon. Friend the Chancellor.

I turn first to the question of the recycling of the oil moneys, the so-called petro-dollars. I have been perturbed in recent months about the way in which some western developed countries have been gathering together to discuss ways in which they can recycle oil moneys. They have tended to neglect the essential problem of recycling, which involves the Arab countries, and they have tended to look at the matter as a way of getting us out of our difficulties.

I wish to draw attention in particular to the problems faced by the Arab countries. Hon. Members will recall that my profession is an oil consultant. In the past I have been a consultant to some of the Middle Eastern Governments. The central problem faced by Middle Eastern countries is that they know that their single asset, their oil reserves, will one day become exhausted. When that happens their income will also become exhausted. They therefore have to decide now what they must do with their present income in order to provide for themselves after the end of the present century, when their income will be greatly reduced.

Some of the countries, particularly Iran, have decided that the thing to do is to industrialise. The Shah has grand schemes for developing a petro-chemical industry in Iran, and a lot of the oil revenues will be used for that purpose. If a country does industrialise it will be in the position of having, when the oil runs out, fixed assets which it can use to generate income in the future. Countries like Saudi Arabia and Kuwait, which do not have the possibility of industrialisation, must choose another course. It has been suggested that they could make the desert bloom, but there is no logic in making the desert bloom or in growing 10 dollar lettuces there when they can be imported for 10 cents.

Many of these countries find themselves in this sort of situation. They must find a secure home now for their revenues so that those revenues can continue to support them when their oil runs out. The obvious place in which to invest that money is the developed and developing economies.

However, I do not have to remind the House that the oil sheiks themselves are not unaware of the fact that countries can nationalise assets which are within their own borders. They have done it themselves. If they are to invest in our economies, they are only too well aware that we could easily nationalise the assets which their investments formed for us. So, above all when discussing with the Arab countries ways of recycling this oil income, what is needed is an absolute guarantee to them for the investment of that money so that the income from the investments will continue to accrue to them after their oil has disappeared.

I have to admit that were I today in the position of advising the Saudi Arabian Government I should have to say that, till such a guarantee should be available, the best that they could do would be to reduce production and to raise the price. No doubt hon. Members from Scotland envisage the day when they will be in this position themselves. No doubt much of the funds will be used, for a start, to rebuild Hadrian's Wall.

I commend those of my right hon. Friends who will join other countries in discussing the best way to recycle these oil moneys to think in terms of forming some kind of foolproof, copper-bottomed international bank which will guarantee to the oil-producing countries that the money that they invest will produce a guaranteed income for them in years to come. That is an essential first necessity before anyone can solve the problem of recycling this money.

I turn now to the local energy scene and that part of my right hon. Friend's Budget speech dealing with the progressive removal of subsidies from our nationalised industries, especially the electricity industry. This immediately struck me as a somewhat regressive move. The Chancellor of the Exchequer stood at the Dispatch Box and next to him was my right hon. Friend the Secretary of State for Prices and Consumer Protection who has just been putting on subsidies, but my right hon. Friend the Chancellor was discussing the subsidies that he was about to remove.

Subsidies are a form of indirect help to the lower paid. In the past Labour Governments have always believed in this form of selective help. Because of the difficulty with respect to energy consumption I can see the case for the removal of subsidies from the nationalised industries which are involved in energy, but I suggest to my right hon. Friend that the weight which will fall upon the ordinary consumer it totally out of proportion to the weight which will fall upon other consumers.

The consumption of energy is a direct function of wealth. The wealthier the individual, the more energy he consumes. I suggest that perhaps the best way of tackling this problem is to turn the tariff system upside down. At the moment, conventional wisdom is that the tariff should be highest for the smallest consumer. This is based on two premises. The first is that it is more expensive to service a small consumer. The second is that if the tariff is decreased as more energy is consumed that will be an encouragement for people to use more energy. Today, we do not want to encourage the use of more, so I suggest that we turn the system upside down and make it cheaper for those who use small amounts and progressively more expensive the more is used. This would probably result in a greater saving of electricity than any proposal that my right hon. Friend currently has in mind. This is a socially just and elegant solution, and I commend it to my right hon. Friend.

Having dealt with the two matters affecting energy, I turn to the capital transfer tax. I want to make it clear at the outset that I welcome the tax wholeheartedly. It may be heretical to say so, but it has been some years since I believed that British Governments genuinely controlled the macro-economy of the country. The evidence of the past 20 years suggests that they may have moved round the edges but that the macro-economy has been quite outside the control of successive Chancellors of the Exchequer.

I have been more interested in the use of Budgets as a social weapon rather than an economic one. I see the capital transfer tax as one of the major pieces of social legislation to have been put before us for many years. In eradicating inequality and the use of privilege which can be purchased, the tax is one of the major social instruments at our disposal. It is a major piece of Socialist legislation, and I am surprised that we have not heard more objections to it from the Opposition. I suspect that the reason is that the levels at which it has been put are more or less those of the old estate duty, if not slightly below them.

It is a peculiar situation in this country that we have always taxed the creators of wealth and those who earn wealth more highly than those who are given it, those who inherit it and even those who win it on the pools. Again this is a topsy-turvy situation. There is no social or moral justification for the inheritance of wealth. I cannot see that the fact that someone is fortunate enough to be born either directly to, as a cousin of or in some instances the ninth cousin removed of, a very wealthy man should in any way justify his receiving large chunks of money gratuitously without having done a single thing to deserve it. It encourages the worst aspects of what goes on in this country. Even the Opposition will agree that it encourages such unpleasant things as nepotism, filling the Conservative benches with old Etonians and matters of that kind. The sooner that we destroy inherited wealth the sooner we shall be able to construct a society based if not on merit at least on deserts and the sooner we shall get the creators of wealth coming from people whom it will benefit and from whom it will come back again to the community rather than going to those who inherit it. Some years ago in Venezuela——

Mr. Tim Rathbone (Lewes)

I hope that the hon. Gentleman agrees that from that sweeping statement should be excluded small farmers and small shopkeepers who hand on their wherewithal to the succeeding generation and so make it possible for each generation in turn to make its own special contribution to the country.

Dr. Phipps

I am grateful to the hon. Member for reminding me of the part of my speech to which I am about to come. I do not agree with him, however. I am myself a farmer. I have a farm. I face this great difficulty about which the CBI told me the other week. When I die I shall not be able to pass on all the farm to whichever of my four children catches my eye as I am writing my will. I am told that I shall have to split up the farm because the tax will be 50 per cent., which means that I shall have to sell half of it. The converse is also true, of course. If the tax were 100 per cent., the difficulty would not present itself to me.

Mr. Ian Gow (Eastbourne)

If the hon. Gentleman is in difficulty about this it would be proper for him to leave his farm to the Chancellor of the Exchequer. Or perhaps he could leave it to the Chancellor of the Duchy of Lancaster who is in greater need than the Chancellor of the Exchequer.

Dr. Phipps

The hon. Gentleman takes my point.

I now come to the question of the small farmer and the owner of a small business. It is not the ownership of the farm that matters, but the work that is done on it. I see no objection to the farm passing 100 per cent. to the State and the tenancy being given to the son or other inheritor if he wishes to have it. It is the work on the farm and the capital that is put into that piece of land that produce the wealth, not the existence of the land as such, and my principal criticism of what the Chancellor is intending to do is that it goes nowhere near far enough.

We are allowing a donor to give away £1,000 a year and £50,000 on death, I believe, and after that we take at a rate rising to 75 per cent. on a gift of £2 million. I see no justification for that. After £50,000, the State should take the lot. That would make it very much easier to work and would deal completely with the problems of the CBI and the Country Landowners' Association. In addition, it would free hon. Gentlemen in the Opposition from the terrible burden of inheriting large sums of money. I should like to suggest that they are prepared and willing to transfer that burden to the broad and ample shoulders of my right hon. Friend the Chancellor of the Exchequer.

7.31 p.m.

Mr. J. Enoch Powell (Down, South)

I was fascinated to discover that in following the hon. Member for the next-door constituency to Wolverhampton, South-West I was following a farmer, but I thought that the end of his speech was not so good as the beginning. To the first topic on which the hon. Member for Dudley, West (Dr. Phipps) touched, that of the so-called oil revenues and their recycling, I shall come in the course of what I have to say, and I ask him to forgive me if I arrive there by my own route.

First, I want to congratulate the Chancellor of the Exchequer on having been so fortunate as to receive an unenthusiastic response to his Budget. Not for him the experience which comes to Chancellors of the Exchequer who sit down amid a flurry of waving Order Papers, who wake up the following morning to read the laudatory articles in the newspapers, only to find 48 hours or a little more afterwards that their Budget has come to wear a different aspect and to discover after only a few months that little, if anything, is left of its intended consequences.

It is not surprising, I think, that it should be the unpopular portions of a Budget that are often the wisest, and I think that that is true of some parts of the Budget proposals before the House. In using price as a means to ensure the economical use of resources, first by his increase in VAT on petrol, but much more by his reversion to unsubsidised pricing in the nationalised energy industries, the right hon. Gentleman is using the most efficient method that is available.

People confronted with the facts of life in terms of price, either at the domestic level or in the management of great concerns, prove to be much more flexible in their expedients and much more inventive and imaginative than they could possibly have been rendered by any form of control or direction. I believe, therefore, that the right hon. Gentleman is wise in using price to help him in the business of the nation in getting the best return for the effort that has to go into purchasing the nation's energy.

Perhaps also the slight loosening, if that is what it is, of the bonds of price control—though personally I hate the whole system and consider it totally useless—can be regarded as contributing in some small measure to the rewarding and encouragement of efficiency.

The decision about the nationalised industries—the elimination, which I hope will be as swift as possible, of the mounting element of public subsidy—will assist the right hon. Gentleman in the major object which he has set himself in the control of total public expenditure. I am not sure, experienced though he is in office, whether the right hon. Gentleman even yet knows how severe a task he has imposed upon himself by aiming at an average annual increase in real terms of no more than 2¾per cent. in total public expenditure. Of course, he has provided himself with the useful loophole, or easement, of the word "average", but I trust that the right hon. Gentleman will not have to cash that cheque at an early stage, because, once he has cashed it, his task in the subsequent years of the quadrennium will be all the more difficult.

I hope that in achieving his object the right hon. Gentleman will have the support of all his colleagues, and in particular the support of that colleague whose support is indispensable to a Chancellor of the Exchequer and without which the Lord High Treasurer, nowadays called the Chancellor of the Exchequer, is as nothing, namely, the First Lord of the Treasury, the Prime Minister himself. In other words, I hope that this is the central purpose of the Government in the field of finance, a purpose in which they will persevere.

The right hon. Gentleman has been criticised for pitching the figure as high as 2¾ per cent. per annum. I think that, if comparison be made with previous long-term forecasts of public expenditure for many years past, it will be found that 2¾ per cent. is at the low rather than the high end of the scale. If the Chancellor of the Exchequer finds that he can succeed in this object, perhaps it will be easier for control of public expenditure to be extended later on and made even more effective. At any rate I ask the right hon. Gentleman, and I particularly ask the House, to be under no illusions as to the importance and the difficulty of the task that he has accepted.

Along with my colleagues representing 10 of the 12 seats in Northern Ire- land, I was returned to this House on an election programme which, on this subject, said as follows: Believing that the size of total state expenditure is a major factor in this"— that is in reducing the rate of inflation— we shall support firm measures to control the rise in public expenditure and prevent government from continuing to resort to inflationary methods of finance. I do not know whether the official Opposition intend tonight to record a general repudiation of this Budget. If they do, that is certainly not something in which we should be justified in joining them. Indeed we should regard ourselves, while free to criticise and oppose individual elements in the Budget, as duty bound by the terms on which we were returned here to support the Chancellor in anything that will contribute to controlling the rise in public expenditure and fighting inflationary financing.

There was a phrase which may have caught the attention of some hon. Members in the passage which I quoted from the United Ulster Unionists' manifesto. It was the words "a major factor". Of course, the presence of those words refers to a debate, a battle, which has raged these many years now and rages still: the dispute as to the nature, the causes and, therefore, the cure of the scourge of inflation. I have long made no secret of the fact that I believe that inflation, as we know it, derives from a single cause, from a monetary cause, from the excessive expansion of monetary demand in the economy, and that all the accompaniments of inflation—rising prices, rising wages and the rest—are symptoms and not causes.

However, this is the battlefield over which prices and incomes policies of various descriptions, and now their successor, the social contract, have been pushed and pulled, dragged and mauled, year in and year out. So, while noting with some satisfaction that, if I am not mistaken, I seem to be less isolated than I used to be in attributing inflation and its consequences to Government financing, nevetheless I should like to secure in this debate as wide a basis of agreement between all parties to the dispute as can possibly be achieved. For I think that the more we can approach impending dangers conscious of standing upon some common ground, the better for us and the better for those whom we serve.

I would therefore put this to the House. I will not insist upon one exclusive cause of inflation; but I very much doubt whether there is any hon. Member of any persuasion, whether he is a firm adherent of the social contract, of voluntary prices and incomes policy or of statutory controls, who does not believe that, were a large net borrowing requirement, or deficit on public account, to be financed by borrowing from the banks, with the consequent increase in money supply—or money demand—the consequences would overwhelm and sweep away anything which might be achieved by any of those other policies. Indeed, those who have put those policies forward through the years, including, as my hon. Friend the Member for Barkston Ash (Mr. Alison) brought out very well today, the social contract—those who have constructed one prices and incomes policy after another—have all said "But it is a necessary condition that the money supply should be properly controlled."

So it seems to me that we can stand upon this common ground in facing the appalling threat which overhangs our economy in terms of the unprecedented net borrowing requirement which the Budget Statement revealed. It is a cloud which hangs over the entire scene, because no hon. Member would dispute, whatever his other opions, that if a sum of those dimensions or anything like it should have to be financed by resort to the banking system, the inflation which would follow would be massive and disastrous in its consequences.

In years gone by a Chancellor of the Exchequer faced with a net borowing requirement had two recourses open to him, and two only. They were the classic alternatives of borrowing from the public—and thus transferring purchasing power, with no net effect upon inflation—or of borrowing from the banking systerm and thus expanding the credit base of the banking system with the inevitable inflationary result. But there has been a striking change in this debate in the last 12 months. For now the Chancellor of the Exchequer not only has, but has used on a massive scale, a third alternative, that of borrowing from overseas, which in its immediate monetary effect is exactly the same—is no more inflationary in its immediate effect—as if he had been able to borrow a like sum from the domestic public.

In looking at this new factor of the scene and placing it against the background of our unprecedented net borrowing requirement, I ask the indulgence of the House for a minute or two of semantics on the subject of the balance of payments. Over years of brainwashing, we have come to use the words "balance of payments" in a sense exactly opposite to their natural meaning. We have learned, over these years of travail, to say "balance of payments" when we really meant a deficit in some element or another of the overall balance of payments.

The fact is that a balance of payments is—what it says—a "balance" of payments and cannot be anything else. A country's total payments in and out always balance, always have done, and always will do, for the simple reason that they cannot help it. Indeed, they are two aspects of one and the same transaction. By an inscrutable but all-wise dispensation of providence, it is a fact upon which we may rely that the number of pounds relinquished in order to procure francs is exactly the same as the number of pounds secured by relinquishing francs.

Indeed, the reality of a balance of payments is a volume of exchanges of one currency into others, which therefore is automatically self-balancing. This mass or volume we attempt, for purposes malevolent or beneficent, to analyse into two columns—in and out. We rarely succeed. Hon. Members who have made a habit, as I have, of keeping the balancing items from year to year as special pets will know that the statisticians are sometimes a very long way out in their attempts to analyse the inevitable overall balance of payments into various items in either column of an imaginary balance sheet.

In this analysis one of the big subdivisions is that between current account and capital account—between payments in and out of current account and payments in and out of capital account. Since the balance of payments must balance, cannot but balance, it follows that to a deficit on any element which we choose to identify separately must correspond an exactly equal surplus on all the rest, and vice versa.Thus to a deficit of a given amount on current transactions must correspond an equal surplus on capital transactions, and vice versa. Like seasickness in the Punch cartoon, it does itself. This is of the necessity of nature. We cannot have a given surplus on our capital account—in other words a given net inflow of capital into this country—unless we have exactly the same deficit on our current payments.

I hope that I have not over-laboured the point; but it brings me straight to the nature not just of the right hon. Gentleman's predicament but of the predicament of this House as the guardian of the nation's finances and therefore of the country as a whole.

Paradoxically, it is the deficit on our current account which has enabled the right hon. Gentleman to cover so much of his net borrowing requirement by borrowing from overseas. If there were no deficit on current account, there could be no net borrowing from overseas. It would be impossible. So he and all of us are caught in a tragic triangle, a triangle which consists of, first, the deficit on current account, the so-called balance of payments deficit; second, the borrowing from overseas, sometimes called recycling of the oil revenues and all the rest; and third, the net borrowing requirement. The net borrowing requirement, met by the borrowing from overseas, is possible only because of the huge deficit on our current account. The three are causally linked together, so that if any one of them were to be disturbed, big changes must take place in the others. For example, if there were no borrowing from abroad, the value of the pound in the exchanges would have to fall to the point at which our current account balanced, as well as our capital account.

This triangle—current account, overseas borrowing, net borrowing requirement—is, I believe, pregnant with great danger to us at present but also contains within itself the seeds of great hope and encouragement for the future.

Let me indicate first where the peril lies, though this has been referred to many times in this debate. If by any chance the flow of lending from overseas slows clown or ceases, not only, as I have said, would there be a precipitate fall in he exchange value of the pound but also, since the net borrowing requirement would be uncovered, it would be inevitable, with so large a mass, that it would be financed by inflation on a scale which would be likely to sweep away all the other intentions and undertakings of the Chancellor of the Exchequer. So he lives under the constant threat of inability to finance the net borrowing requirement by this means. If, of course, that flow were not merely to cease but were to be reversed—and these lendings are in forms which are readily reversible—our situation would be so much the worse; for the value of the £ sterling would have to fall even further as we endeavoured to make the repayments which were called for.

We are living literally on borrowed time. We are living under the shadow of a danger which may come upon us at any time and from unexpected causes. We cannot be safe, none of the policies of the present Government can be safe, as long as there is a net borrowing requirement of anything like that size. The fact that at present it is being financed, as the right hon. Gentleman has told us, in no way diminishes the nature of the peril.

But now, having invited the House to look upon this picture, to look upon this danger, I now ask the House to look upon the reverse side. Let us suppose that, by control of the total of public spending, by achieving his object and by achieving it in such a way that he reduces his net borrowing requirement to domestically manageable proportions, the right hon. Gentleman no longer needs to borrow these portentous sums from overseas. What would then happen? One thing which would happen—if I may say so to the Chancellor of the Duchy of Lancaster, it was the one point which was missing from his speech this afternoon and which the hon. Member for Horsham and Crawley (Mr. Hordern) repeatedly attempted to insert—would be that through the withdrawal from the market of this huge borrowing demand by the British Government, the balance of supply and demand for loanable capital would be radically altered and, in consequence, interest rates would fall. That would be the inevitable consequence: interest rates would fall sharply if £5,000 million of borrowing demand was withdrawn by the Government from the market.

There has been tremendous talk and great anxiety—justified anxiety—about investment. But to talk about investment, to talk about British industry investing—what I am going to say is not seriously altered by the new institutional arrangements, and I do not believe the Government would claim that it is—when the going interest rate for industrial investment is between 15 per cent. and 20 per cent. is really a mockery. This country cannot invest in its industries, our industries cannot go ahead with new capital, when interest rates and the price of new capital for industry stand at 15 per cent. to 20 per cent. per annum. That is where the hole is. That is where the obstacle ties to the investment for which we are all, on both sides of the House, looking. Remove the net borrowing requirement, remove the huge Government borrowing from the market, and interest rates begin to reflect something like the real balance of supply and demand for investible funds.

But what would happen to the flow of money from overseas? I suppose that those who are lending the right hon. Gentleman this money, whether it is His Imperial Majesty the King of Kings, the Shah of Persia, or whether it is any less distinguished investor, are not doing it for the sake of his beautiful eyes or out of love for the British nation, to help them—mistakenly indeed—in their difficulties by covering their net borrowing requirement. They are doing it—I should be shocked if they were not—because they regard it as the best place for the time being to put their money. No doubt the interest they are getting on it is a substantial element in their calculation; but it is by no means the only element. Of course, if interest rates fall sharply in this country, as they would do were the Government as a massive borrower to withdraw, the transfer of funds to Britain would be that much less attractive so far as immediate interest went, and a different balance would have to be struck in the new circumstances between the deficit on current account and the surplus inflow, which I have no doubt would continue, on capital account.

But it is not only the current rate of interest which attracts capital into the country. It is not the current rate of interest which most attracts the sort of capital which we need. I should need a great deal of persuading to believe that a Britain which had shown itself capable and determined enough to finance its public expenditure without this vast net borrowing requirement, a nation which was clearly determined to regain the stability of value of its currency, would not appear to be one of the most attractive havens and investments from one end of the world to the other for those who had capital to invest.

A deficit on the balance of payments—I have already suggested this—is not a curse in itself. It can be a blessing. The United States and Canada would not today be the countries they are if they had not had corking deficits on current account in the 19th century: it was the counterpart of the massive investment which took place in those countries.

I believe that this country today is in a position somewhat analogous to that; for I have an unrepentant faith in the future of British industry and commerce, and therefore in the ability of British industry and commerce to attract investment not only from our own citizens but from most parts of the world where there are investible surpluses.

This hope, which I have ventured to express and which is the counterpart of the fear under which we live, is one by which the two sides of the House need not be divided. In asking the Government to eliminate this huge net borrowing requirement I am not asking Labour Members to give up any of the characteristic tenets in which they believe. If they believe that the management and ownership of the State should be proportionately extended in the British economy, that can be achieved consistently with honest finance, with the avoidance of inflation and without an unmanageable net borrowing requirement.

Nor is the absence of a net borrowing requirement a threat to any section in the community. Surely it is not part of the tenets of Socialism—if it is, it has been very well concealed—that it should make its advances by way of inflation. I am sure that Labour Members made that as clear at successive elections as any other candidates have done.

Mr. Lever

I am interested in the right hon. Gentleman's argument and I do not want to give encouragement for precipitate action. Is the right hon. Gentleman saying that the Chancellor could finance the buying-up into public ownership next week of half of British industry without increasing the borrowing requirement?

Mr. Powell

I was not contemplating, despite what I hear of the power of the Left wing and the Tribune MPs, that the Chancellor would be engaging in that spree next week; but the right hon. Gentleman knows as well as I do that the essential nature of nationalisation is not buying up in the sense of an individual purchasing an article; it is a transfer and exchange of rights to receive future revenue. [Interruption.] Of course, I know perfectly well that it involves creating Government liabilities, but not necessarily putting these liabilities on the market. I challenge the right hon. Gentleman or any other hon. Member on the Government benches, when we are hereafter told their intentions on nationalisation, to say that they intend to accomplish the process by inflation. Are they saying that they intend to do it dishonestly or openly, as a democratic party in a democratic Parliament?

There is nothing between any of the elements of the House in this respect. There is no element in this House that could achieve its ends only by means of the net borrowing requirement by which we are threatened. Conversely, that means that the Chancellor should be able to appeal to the whole House for assistance in his central task—to reduce that net borrowing requirement to proportions which can be financed now and hereafter without the risk of causing inflation.

Appeals are made for national unity. I believe that there is a great deal of sincerity in them and that there is at least as much sincerity out of doors as there is indoors when that appeal is made. Here, then, is an area for the exercise of national unity, not by the pretence that the two parties are identical, not by the pretence that we do not differ in our social objectives, but by the acceptance that we agree on the nature of our national predicament and that, therefore, we can agree in our determination to banish the danger and to restore the hope and the prospects of Britain.

8.5 p.m.

Mr. Geoff Edge (Aldridge-Brownhills)

It is always a pleasure to listen to the right hon. Member for Down, South (Mr. Powell). I had thought that my right hon. Friend the Chancellor had imposed value added tax on all forms of entertainment, but after a speech like that I realise that some entertainment is still untaxed.

I have been listening to the right hon. Member for Down, South for many years. I think that 1962 was the first occasion I can remember, and then he made a speech praising the export record of the British motor cycle industry. That was an infinitely less controversial speech to make then than it would be to make now. Of course, I have listened to the right hon. Gentleman on occasions since then as with each speech he has grown more and more famous and become more and more publicised, through Rookes v. Barnard, rivers of blood in the Tiber, needs being converted into rights at Leicester and so on. I heard them illicitly because most of the meetings were guarded and it was only by obtaining a ticket through the black market mechanism that I was able to get in and hear what he said.

I do not share the right hon. Gentleman's faith in the power of the market mechanism. Its intellectual attractions are considerable. We realise that the right hon. Gentleman's intellectual advice about the perfect economic world—that if only the market were left to itself all would be well—is fine and fascinating. Unfortunately I do not believe, after a long study in one of the backwaters of economics, that this ever happens in the real world.

I do not believe it is desirable in any way to try to make a major cutback in public expenditure. Too often in this House we lose sight of the realities of particular policies which are advocated. I am deeply concerned about the attempt to limit public expenditure increases to 2¾ per cent. Only last night, sitting in a council chamber in North Buckinghamshire, I was asked as vice chairman of the planning committee to give my consent, because of lack of money, to the construction of temporary classrooms which would last 10 to 15 years. I was asked to give my consent to a temporary school which was intended to last for 15 years. If that is what cutting public expenditure or containing the growth of public expenditure means, I regard it as unacceptable.

Let us be under no illusions. I know from a brief chance to peep inside the activities of the Department of Education that any further cutbacks in that Department's money will mean that no slum schools will be replaced, because the money that is now available means that only one or two can be replaced anyway. So we would be throwing away the whole of the school replacement programme. It might even be that we would go further and lose many of the basic needs places which are vital if we are to provide that classrooms do not become desperately overcrowded.

There are other dangers. If we say to the local authorities that the amount of money they can have via the Public Works Loan Board is limited, perhaps they will cut back on recreation projects, and possibly in time of financial stringency and crisis there is a case for doing that. But they would need to cut back on some of their key housing projects as well. We have seen in the last four or five years a dramatic growth in the numbers of people on housing lists, people who are inevitably forced to look to the local council for a house because the market mechanism has deprived them of the opportunity of ever buying a house. There is, therefore, an urgent need not for less finance for local authorities or less public spending but for more if we are serious in seeking to reduce housing lists in any way.

The prospects of replacing our old hospitals are threatened. Already a hospital in my constituency, the starting date of which was given as 1980–81, runs a danger of being delayed still further. Even an attempt to contain the growth of public expenditure to 2¾ per cent. would mean consigning our children, our sick and our young couples to living conditions or educational conditions that no hon. Member would regard as acceptable.

The Government have a duty to the House to set out in detail at the earliest opportunity the exact effect of their proposed controls of public expenditure so that we may all know exactly what they imply and what is involved. We may then be able to argue on the priorities that their detailed statement suggests.

There is one other matter in the Budget with which I take issue. I refer to the whole question of investment. I have no faith in the market economy or the capacity of British industry to secure an adequate degree of capital investment. Since 1945 we in this country have, with a particularly British skill, found it possible to invest less of our national resources in modernising industry than any other major country in Western Europe. Why should we now believe that the old remedy of encouraging capital investment via the market should suddenly produce the results which it has failed to produce since 1945, under successive Governments with different political attitudes? That is to promise a new future for Britain and to come out with an old, worn-out solution.

The proposal to invest new money in Finance for Industry is dangerous. For one thing, it does not meet the criterion of my right hon. Friend the Chancellor of the Exchequer of being selective in the aid we give to industry. It is not selective in terms of the regions, the size of companies or the industrial sectors which receive aid. For example, we are not asked to use Finance for Industry only to help small and medium-size firms, whatever those vague terms may mean. Category 1 firms with over £50 million of annual turnover could benefit from Finance from Industry, so presumably all firms could benefit [Interruption.] My right hon. Friend the Chancellor of the Duchy of Lancaster seems to be suggesting that Category 1 firms will not be able to benefit.

Mr. Lever

All firms will benefit.

Mr. Edge

I am delighted that we have managed to obtain that confession from my right hon. Friend. Some of his friends in the Treasury were suggesting otherwise earlier today. I should hate to misconstrue my right hon. Friend's remarks, but it seems that all firms will be able to benefit, large as well as small.

Mr. Lever

I should not have intervened from a sitting position. So that I am not misunderstood, let me make it plain that when I say "all firms" it is not size that will determine the possibility of acquiring loans. It is the purpose of the loans—capital investment, exports and the like.

Mr. Edge

I thank my right hon. Friend for that information. It is only right that the House should be clear exactly what is proposed. I raised the matter only because some of my right hon. Friend's Treasury colleagues were suggesting that there would still be some control over the size of firm that could go to Finance for Industry. My right hon. Friend has given us a valuable piece of information. What he says makes the proposal for Finance for Industry even more objectionable than I and some of my hon. Friends had suspected. It means that we are abrogating any chance to influence and control the directions of capital investments in this country and any chance to influence the areas of regional investment.

No one would object to small firms, desperately short of liquidity and the opportunity to obtain investment capital as they are, being able to benefit from the existing arrangements under Finance for Industry. No one would object to their using the regional offices of the Finance for Industry organisation to obtain immediate, short-term capital. Indeed, for many small firms only the existing apparatus of Finance for Industry could possibly provide economic aid in time. The proposals of my right hon. Friend the Chancellor of the Exchequer for £2,000 million of investment will not come into effect in time for many of the small firms that are in financial difficulties. Therefore, no one would object to that idea.

But if the Government were serious about producing a policy for small firms, they would need to begin to argue with the local authorities as well. The local authorities, great cities such as Birmingham, have a major impact on the economic future of small firms, by demolishing cheap industrial premises and forcing small firms to move, by charging them rents they cannot afford. By all means let us agree that we should have a policy for small firms, but let it be genuine and realistic, a policy that recognises that small firms need cheap industrial premises just as much as they need investment capital.

Let us also recognise that many small firms are a transitory element in the economy. In the West Midlands, for example, which the right hon. Member for Down, South knows well, the mortality rate of small firms is very high. There are 22,000 firms in the West Midlands, well over 10,000 of which have a life expectancy of only five years. The employment they create is essentially transitory. Their economic problems are essentially different in character from the problems faced by large companies, the Category 1 firms with a turnover of more than £50 million a year.

Far from creating the Finance for Industry organisation, we should try to get private capital to flow into the National Enterprise Board. My right hon. Friend the Chancellor of the Exchequer should have said "As a matter of urgency, I intend to create the National Enterprise Board. As a matter of urgency, I intend to introduce a system of planning agreements so that we may sit down with the large firms, which together control 50 per cent. of our economy, and argue together how the economy should develop, argue where there is a desperate need for capital investment, not only in particular sectors of industry but in particular regions."

Since 1947 we have adopted a regional economic policy aimed at eliminating unemployment in Scotland, Wales and Northern Ireland. It has been a spectacular failure, because we have not been prepared to try to direct industry more and to consult it more on exactly where industry is to be located.

It is possible for Opposition Members and my right hon. Friend to take a different view, to believe that the Government should not extend their influence over the economy, that they should not concern themselves to such an extent with the detailed pattern of industrial investment. That is a reasonable view to take. All of us on the Labour benches, however, were elected with a pledge to create a National Enterprise Board and to introduce a system of planning agreements. Giving the FFI its greatly expanded rôle does not bring that policy nearer to fulfilment. Indeed, it carries the Utopia in which we all believe further away. I hope that my right hon. Friend the Chancellor of the Duchy of Lancaster will acknowledge that those few Utopians who are left have been deeply disillusioned by some of his proposals.

I do not believe that it is possible to solve the fundamental economic and industrial problems of this country unless we are prepared to intervene in industry on a massive new scale. That means the Government being prepared not only to use their own finance, whether borrowed or raised from the taxpayer, but to try to harness private finance in their efforts to control industry to a far greater extent, with control not for its own sake but to produce an integrated economy in which the shortages and blockages that inevitably occur as an economy expands are eliminated.

That is the challenge we face. Unfortunately I do not believe that the Government's proposal helps to carry us along the right road.

8.20 p.m.

Mr. Peter Hordern (Horsham and Crawley)

I agree with the hon. Member for Aldridge-Brownhills (Mr. Edge) in one respect at least and that is on his close concern with public expenditure. I agree that the sooner the House obtains details of the proposals on public expenditure the better. It is a little shameful that we have not been given far more details by the Government in the Chancellor of the Exchequer's Budget Statement. I hope that we shall not have to wait too long before we see exactly what are the proposals, and particularly those for the nationalised industries.

I wish first to concentrate my remarks on the deficit and the borrowing requirement, about which a great deal has already been said. It is in absolute terms an enormous balance of payments deficit and an unconscionable borrowing requirement. I could quote what the Chancellor of the Exchequer said about the borrowing requirement which he had inherited and how essential it was to reduce that borrowing requirement as soon as possible, but I will not do so. The fact is we find ourselves with this borrowing requirement, plus a record balance of payments deficit. The borrowing requirement is not only large in absolute terms but is large in relative terms compared with the balance of payments deficit and, indeed, with the borrowing requirements of our major competitor countries.

I believe that the Government's hope in fulfilling the borrowing requirement is very much subject to what the OPEC countries decide to do in their own interests in investing their funds, and it is important to understand our relative position. Every major country is hoping to make an improvement on its balance of payments. Indeed, this is what the Chancellor of the Exchequer said that he was out to do. He said that our balance of payments was running at slightly less than £4,000 million. Nevertheless, it is the worst balance of payments deficit of any of the major countries. I believe it is true that we are making the least effort to restore our balance of payments, compared with other countries. Certainly the right hon. Gentleman has tried to persuade other countries to take a more expansionist view of their economies than they are at present determined to do.

There is another danger that must be faced. Every country has forecast that it will be able to retract its balance of payment deficit, but the one certain thing is that the size of the overall deficit will be about $70,000 million. This is a sum which will have to be covered and there will be an ugly rush round the musical chairs to avoid being the country with the largest debtor position.

In our position we have the least advantage compared with other countries. We appear to have the highest unit labour cost of our competitor countries. It also appears that our balance of payments is not only worse than the situation in those other countries but that our balance of trade, as yesterday's figures showed, is in a rather worse position than that displayed in our competitor countries. Therefore, we face a prospect of an increasing balance of payments deficit and a growing borrowing requirement.

It is important to recognise this fact in assessing what chances the Government have of fulfilling this borrowing requirement—namely, a figure of £6,300 million. It is an unthinkable sum for any ordinary method of financing through the domestic market. It can only be filled through investment from abroad and from the OPEC countries. I would not be surprised if the Chancellor of the Exchequer or the Government were to announce some major loans made to the Government to fulfil a large part of the borrowing requirement, but I would part company with anybody who said that it makes no difference in cost terms to this country compared with fulfilling our borrowing requirement domestically.

What matters is the calculation of interest which we have to pay to our overseas creditors. If we were to be lent £4,000 million the interest would be reckoned to be not less than 10 per cent. The £400 million paid in interest could not be counted as anything less than a tax on our country, whereas interest paid domestically would be at least a receipt in the hands of our own people. Therefore, there is a large straight tax which is being placed on our people, even if there is a hope that we might fulfil the borrowing requirement. I also believe that the overseas creditors will be looking to us in another way. They will not be concerned only with the size of the borrowing requirement for one year only, what will concern them most is the prospect for the future.

Let me turn to the point which was being made by the right hon. Gentleman the Chancellor of the Duchy of Lancaster about new finance for industry. The point I was making to the right hon. Gentleman—he was not asleep as he was talking at the time—was that to the extent to which institutions would fulfil his Finance for Industry undertaking there will be taken from the market funds which could have funded the borrowing requirement in general. To the extent of £1,000 million, which is no insignificant sum, that amount of money will not now be available to fulfil the borrowing requirement.

I do not need to dwell on the tragic results that will occur if, for any reason at all, the borrowing requirement is not met either from home or from abroad—[Interruption.]—The Chancellor of the Duchy of Lancaster says it will be, and I am delighted to hear it. What they will look at carefully is the prospective balance of payments deficit and borrowing requirement in future years.

I wish I could draw comfort from the Government's proposals, brave and bold as they are, to keep their public expenditure down to an average of 2¾ per cent. a year for four years. This will be a most difficult undertaking. If my experience of reading Public Expenditure White Papers holds good for the White Paper we are about to receive, we shall see a comparatively large increase in public expenditure this year and next year followed by a sharp reduction in the following two years. I hope I am wrong, but this has been my experience over the years. We are likely to find little growth in the economy either this year or next year. Our level of public expenditure in the next two years will greatly exceed the amount of growth that we can expect in the economy. Thus, I fear that public expenditure will take a larger part of our gross national product and our borrowing requirement may well become larger.

The Labour Party is right to ask what the Conservatives would do about cutting public expenditure and we shall debate this matter later. In respect of local authority expenditure, not only has it grown rapidly in recent years, but the number of people engaged in local authority work has grown to a remarkable degree. During the last 10 years, the number of people employed by local authorities has gone up by no less than 50 per cent. I cannot believe that the standard of the service which the Government and the local authorities have provided in that time has improved to such an extent that they require another 50 per cent. staff. This is one aspect to which the Government could look in dealing with expenditure, and I hope that we shall see some progress on it.

I turn now to the proposals for companies. I recognise the value of the relief that the Government have given, but it would have been very much better and simplier for all concerned had the Government scrapped the whole of the price control system, so that companies knew precisely where they were. What the Chancellor of the Duchy of Lancaster fails to realise is that it is not that the companies require a cash injection, let alone loans on a medium-term basis, because interest rates are very high. What they require is an assurance that they can operate in market conditions and plan their operations in confidence. They are more able to do that if they have the freedom to charge prices in the market and not according to the obscure and complicated set of regulations which the Government have foisted upon them.

The position we are in is remarkable, especially when one takes out of account the amount of money which might be subscribed by domestic lenders to the Government. About £4,000 million needs to be found from abroad to fulfil our own current and capital expenditure. Thus, we are dependent for one-eighth of our current and capital expenditure on overseas lenders. It is a remarkable position that we find ourselves in when we have a Labour Government committed to a fully Socialist policy supported and financed by His Imperial Majesty the Shah of Persia. How long this situation will go on I do not know, but I confidently expect to listen to the Chancellor of the Exchequer unfolding his next Budget in January.

8.32 p.m.

Mr. George Park (Coventry, North-East)

Amid the general noises of approval of the Budget proposals that we have heard today there is one matter on which there are grave doubts, and that is the situation of local government. Most Chancellors of the Exchequer seem to have the idea that local government expenditure can be turned on and off like a tap. I admit that my right hon. Friend is not seeking to emulate his predecessor, but the fact remains that the local authorities have not yet healed the wounds inflicted on them by the Barber axe.

The proposals now before us seem to ignore the fact that local authorities are committed to an increased need for resources of men and money. The hon. Member for Cornwall, North (Mr. Pardoe) felt that cuts could take place in those areas of expenditure only where there were no statutory commitments. I want to remind the House of some areas where there are statutory commitments and where the needs are continuous and rising.

For example, when the Chronically Sick and Disabled Persons Act was brought in not a single local authority was in a position to say how many people were affected or how much it would cost. Even today the lists are being added to and local authorities still cannot quantify the total amount which comes under the heading of the Act. The same applies to the Children and Young Persons Act.

Then again, there can be no doubt that additional resources are needed to implement the comprehensive schools programme, and, as has been said, the replacement programme is in some severe danger. My right hon. Friend expresses the view that we have to make up the lost ground on the housing programme, but if their housing programmes are to proceed the local authorities will need to be given, for example, more money for sewerage. It is not possible to get houses off the ground till we have sewers in the ground.

The Severn-Trent Water Authority is already £2 million in deficit. That non-democratic organisation is proposing highly expensive administrative schemes which should be chopped off at the roots. Even when that is done—and I hope it will be done—there will still be greatly increased precepts on the district councils' water rates in the coming financial year. They will have to be met.

Given the levels proposed in the Budget there can be little doubt that we shall see increased charges for day nurseries and other supportive services. We may reach the point of having to impose staff redundancies. I believe that my right hon. Friend is using far too broad a brush when he tells local government not to engage any more staff. He leaves out of account examples such as those with which I am familiar in the West Midlands Metropolitan County Council. That is an authority which engaged only a minimal staff. It increased its staff gradually as its responsibilities increased. To suggest to that authority that it should now have an embargo placed upon it can only mean that there will be great gaps left in its ability to discharge the responsibilities laid upon it by central Government. On a more mundane level, the general public will have to become accustomed to long delays in the carrying through of the procedures associated with such items as planning blight.

Those are some of the basic facts of life that face local government and which are passed over in a facile way by some hon. Members using the shorthand term of the control of Government public expenditure. We must first ask ourselves what the money is being spent on before that expression starts to get some flesh on its bones. I have listened to Conservative Members in full cry on the rate levels. I have no doubt that they will be equally vociferous if the standards and scope of local government services begin to deteriorate.

It is a fact that the general public—I do not exclude myself—talk with two voices on rates. They complain, and probably rightly, about the level of rates. At the same time, when it becomes clear in an indivdual family that the provision for the children's education is not adequate we reserve the right to complain bitterly to the local authority. We also complain if there are homeless people on our streets. We want to know what local government is going to do about it. It can only take action on such matters if the money is provided.

We must find a new way of financing local government. Everyone agrees that the present system is out-dated. I urge hon. Members to throw the baby out with the bath water. I ask them not to place on the system strains which could cause the whole structure to collapse. During local government reorgansation councillors were urged to adopt a more corporate management approach. I do not see this Government and I did not see previous Governments taking note of that advice themselves.

I have had bitter experience of coming to this place many times with local government delegations. If the delegations had a problem which concerned more than one Department it seemed to be impossible for the local government representatives to see at the same time Ministers or officers from two Departments. It seemed that there always had to be two or three separate meetings. If we are looking for efficiency even in that limited area it is clear that we can save the time of local government representatives and avoid the passing of the buck between various Departments and the resulting frustration at local government level. It seems that collective responsibility stops short at the Exchequer. Each Minister fights like mad for money to run his or her Department. Only the Exchequer retains the right to determine what each Department will receive.

It would be of interest to all concerned with good local government if they could be told what efforts were made to collate the many requirements placed upon local government by central Government before arriving at the 2.75 figure. Because that level of resources can only hurt the very people who I am sure my right hon. Friend seeks to help.

8.40 p.m.

Mr. Douglas Crawford (Perth and East Perthshire)

As a parliamentary veteran of two or three weeks, may I join in the congratulations to the hon. Member for Hemel Hempstead (Mr. Corbett). We who travel a lot between Scotland and London know Hemel Hempstead quite well. If I may bowdlerise Dr. Johnson, with the Scottish economy facing a tremendous growth the noblest sight for a Scotsman may be the railway north leading to Scotland.

Although I admire the manoeuvring of the Chancellor of the Exchequer between the pit and the pendulum, between Scylla and Charybdis, I wish to make one or two Scottish references and say that when Scotland resumes self-government he may be left with Corryvreckan but there will not be a Scylla and not much Charybdis and he will be able to reach Ithaca without difficulty.

We have heard references to "this country, this nation". As my hon. Friend the Member for Carmarthen (Mr. Evans) pointed out in the debate on the Queen's Speech, there are four nations in this island. From Scotland's point of view this is a very disappointing Budget. Once again we are being made to take medicine for an illness which we do not possess.

The proposals which I shall make will be unorthodox in this House. Scotland, as my hon. Friend the Member for the Western Isles (Mr. Stewart) pointed out, has no balance of payments problem. The Scottish Council produced a survey in 1968 showing that Scotland exported more than she imported and sold more overseas than she bought from overseas. Scotland is largely self-sufficient in terms of most basic foodstuffs. Her average wage levels are lower than those south of the border and unemployment in Scotland is higher than south of the border. Yet we now have one of the greatest potentials for growth of any country in the whole of Western Europe. It is unthinkable that any Scottish Chancellor of the Exchequer would in those circumstances produce what is really a deflationary or at best a neutral Budget. There would be no need for a Scottish Chancellor of the Exchequer to walk through a minefield avoiding the pits and the pendulums, the Scylla and Charybdis, because there would be no more Scylla or Charybdis.

Any Scottish Chancellor of the Exchequer would reflate because in a self-governing Scotland we would have a balance of payments surplus. Because at the moment we have high unemployment and lower wages, we would be able to reflate the Scottish economy without any danger of overheating, as is happening in the United Kingdom at present. A Scottish Chancellor of the Exchequer would allow an expansion of local authority expenditure in Scotland, perhaps by at least £300 million. A Scottish Chancellor of the Exchequer would encourage the development and stimulation of indigenous industry in Scotland by means of a development corporation with an initial capital of £100 million. Any Scottish Chancellor of the Exchequer would do much more for Scottish agriculture than the announcement of a kind of relief in capital transfer tax, to which farmers in my constituency have said no more than "so far so good, but we fear what is to come."

There is a deeper philosophical point to this, and I state this as an unashamed Anglophile. I wonder whether England has the will to reach her economic salvation. What I do know is that self-government in Scotland will be of benefit not only to Scotland but also to England. The English body politic and economic is so centralised, and perhaps even fossilised, that it needs a major constitutional change if she is to escape from the stagnant waters.

My party believes that self-government for Scotland will administer that kind of constitutional change which will help England to regain her economic sanity. We in Scotland wish to see an economically and politically healthy England and we shall do everything we can to help England regain her prosperity. To be able to help England best we must have our own Scottish budget, our own reflation and our own chance to realise our own undoubted potential. The Budget will not do for Scotland.

I close with a few remarks from the Church and Nation Committee of the Church of Scotland. In a recent report it said: It can only, therefore, be reiterated even more firmly than before that any scheme for legislative and executive devolution, if it is to be meaningful and worthwhile, both to the people of Scotland whose interest and participation are essential, and to the members of the legislature, must provide for real, substantive powers in the economic field. I ask the Chancellor and the hon. Member for Henley (Mr. Heseltine), in replying to the debate, to acknowledge that Scotland, with no balance of payments problem but with high unemployment and low wages, needs a reflationary and not an inflationary or deflationary Budget.

8.46 p.m.

Mr. Russell Fairgrieve (Aberdeenshire, West)

Speaking to my constituents last week I said that there was precious little in the Gracious Speech for West Aberdeenshire. I must now say that there is precious little for them this week in the Chancellor's Budget. I wish to speak about the 25 per cent. VAT on petrol and the tax adjustments that will affect farming and forestry.

I very much regret the introduction of another rate of VAT, which is a tax that should be levied either at one level or at a nil level. The whole point of the change from purchase tax to VAT was to return responsibility to the individual to decide his or her priorities rather than have the gentlemen in Whitehall deciding what was a luxury and what was a necessity. In my opinion a car is a luxury in Central London but a necessity in West Aberdeenshire. This is a tax on distance. If there had to be an increase on petrol it would have been better done via excise duties. That would have carried out one principle in the Budget, that of trying to show what real costs are to all concerned.

The new principle of letting the public know how much coal, electricity, gas and telephone services really cost will not apply to food. Our import bill for food and timber must be over £1,000 million each, making a grand total of about £2,500 million. We could grow much more of our food in this country.

With forestry it is tragic that the United Kingdom, which should have about the highest percentage acreage of trees in Europe, has about the lowest. At all times this nation should do everything it can by taxation and other methods to encourage agriculture in its widest sense and not discriminate against it as has been done by this Budget.

8.48 p.m.

Mr. Ivor Clemitson (Luton, East)

There are two points I wish to raise, one of which is similar to an issue dealt with by the hon. Member for Aberdeenshire, West (Mr. Fairgrieve), namely the question of the VAT increase on petrol. The purpose of this move, according to my right hon. Friend, is to promote the saving of scarce fuel supplies, yet at the same time he tells us that he expects to rake in an extra £200 million a year from this increase.

I wonder whether the Chancellor is following the age-old tradition of his predecessors—that of condemning a practice, whether it be smoking, drinking or using too much petrol, as being deleterious to health or to the economy of the country and at the same time hoping that people will completely ignore his moral strictures and continue in their wicked ways. If my right hon. Friend hopes to get an extra £200 million, he cannot have much faith in the efficacy of his measure.

I am sure that my right hon. Friend is serious when he says that he is concerned to conserve energy, but I am equally sure that he has gone completely the wrong way about it, for two reasons. First it is unfair, it is rationing by price, and secondly, there is no assurance that it will work. He himself appears to have considerable doubts on that score. Surely he should have announced that petrol would be rationed. Rationing would have been fairer, and due allowance could have been made for people living in rural areas. It would have ensured a positive limit being set on the amount of petrol used.

The second aspect on which I wish to touch is the relationship between investment and employment. There seems to be a wide measure of agreement in the House that full employment should be a major goal of economic policy. There also seems to be a wide measure of agreement that we need more investment. The assumption which I wish to challenge is that investment is the way to ensure full employment—in short, the assumption that more investment means more jobs.

A large slice of the help which will be forthcoming to industry from the Budget is in the form of the relaxation of the Price Code. More particularly, help is coming in the relaxation of the productivity deduction factor—a marvellous piece of jargon. I understand this to mean that the more labour-intensive a company is, the more it will be able to pass on any increase in wages to the consumer. This extra money in the system can be used for two purposes, either to oil the machine simply to keep it going, or to replace machines with new ones. If, as we are told, there are many firms which need money to pay off creditors and to pay the wages of their employees and without which the firms would go into liquidation and their workers would consequently be put out of a job, there is clearly a case for putting more oil into the machine, provided that this is seen as a strictly short-term operation to get us over a bad winter. No worker thrown out of his job this winter because his firm went bust for lack of cash would thank us if we failed to do something to help.

When we come to the question of replacing a machine, not simply keeping it going, there are rather different problems. I do not question the need for more investment. We need more investment partly to produce more wealth and partly because we must move into higher and higher realms of technology, but we must be clear about the effects that investment brings particularly on jobs.

From an investment point of view, the concentration of help on firms which are most labour-intensive makes sense, but it makes sense only if we realise that we are trying to make those firms less labour-intensive. In other words, they will retain the same labour force after investment only if their output goes up. The less labour-intensive and the more capital-intensive those firms become, the more will the output have to rise for the same labour force to be retained.

Yet we are told by my right hon. Friend the Chancellor that output is expected to rise only slightly over the next few years. We must face the fact that one of the main causes of the drop in employment in manufacturing industry—it has dropped 12 per cent. in the last eight years—is precisely investment. Industries are becoming and will increasingly become more and more capital intensive. More and more will investment be labour-replacing, and fewer and fewer people will be employed in manufacturing industry. This is no bad thing. Indeed, I think it is to be positively welcomed, provided that the rundown of employment in that sector of the economy is done in such a way as to avoid unemployment.

Since 1966 the total working population has declined both in absolute numbers and in terms of percentage of the total population. This has happened partly because we have nibbled at the edges of the problem. We have raised the school leaving age. I wonder whether we did that for quite the right reason. We have also retired people from their work earlier. In my constituency a new scheme has come into operation at Vauxhall Motors in which people are retired at 58 years of age instead of 65.

Much of this has happened rather than been planned. I am pleading for a planned approach to the rundown in employment in manufacturing industry, a rundown that will increasingly occur as industry becomes more and more capital intensive, as more and more money is invested in it. This will involve such matters as shorter working hours, longer holidays and sabbatical leaves. It will also involve redeployment of labour.

We have to consider increasingly redeploying labour out of manufacturing industry into other areas. I suggest that one of the most important of these areas is that of public service, including, for example, teaching, the social services and public transport. There is a long list. Yet it is at precisely this time that we are talking about severe restrictions on public spending. The number of teachers is being cut. Public transport is suffering from cutbacks, and fewer and fewer buses are being put into the fleets of bus companies. Incidentally, reverting to a point I made earlier, there is the strongest possible argument at this time for spending more and more money on public transport, if only as a fuel-saving measure.

Local authorities are having severely to curtail many services. My right hon. Friend the Chancellor said that a shift of resources into exports and investment was the first priority in economic management. The dilemma to which I am seeking to draw attention is that the shift into manufacturing investment, if it takes place, will increasingly replace labour in manufacturing investment, labour which could be most usefully redeployed in various forms of public service. Yet that investment is to be financed partially at the expense of this same public service.

The Budget, as a short-term, first-aid operation to save jobs this winter, may be welcome, but some of the longer-term implications are more questionable. Sooner or later we must face the fact that the equation that more investment in industry equals more jobs in industry no longer holds.

The case for the National Enterprise Board, planning agreements and public ownership is intended not only to encourage useful investment but to control that investment in such a way that the inevitable effects on employment are turned to the good of the individual and of the community alike.

The case for expanding public service spending is based not only on obvious reasons but also on the need to provide more job opportunities, and, I hope, more satisfying job opportunities. I am prepared to accept that we may need first-aid now. But we also need radical rethinking for the future.

9 p.m.

Mr. Michael Heseltine (Henley)

I want first to join the universal tributes to the hon. Member for Hemel Hempstead (Mr. Corbett) for his maiden speech which, justifiably, has earned praise from the whole House. Having listened to his forceful eloquence I should not want to be associated with the Commission for the New Towns in his constituency if I were likely to be subjected to that sort of battering. We all look forward to hearing him again in the near future.

The Chancellor of the Exchequer found no dissent in the House when he began his Budget speech by saying that it was probably the hardest speech of its sort that any Chancellor of the Exchequer had had to deliver in this House in recent years and probably in the political lifetime of anyone in the House. That was the subject of no dispute.

The question which the Opposition have raised, I believe correctly, is the extent to which the right hon. Gentleman and the judgments that he made in his two earlier Budgets must be called to account for the actions which he has now had to take.

Listening to what the right hon. Gentleman said I took the view that much of the justification for the Budget proposals now before us was contained in his opening words in which he referred to the different status in which he found himself and which saw him transferred from a Chancellor of the Exchequer in a minority Government facing an early election to a Chancellor of the Exchequer in a Government looking forward to a rather longer period in office.

Considering the judgments which the right hon. Gentleman has reached I think that this House and commentators outside it will have learned the lesson which the right hon. Gentleman spelt out for us, that many of the actions that he has now had to take he ought to have taken and knew that he ought to have taken earlier if he had not been trapped in the constraints of an electioneering Parliament which made it impossible and unpalatable to confront people with the realities with which, in small part, he has presented them in the past two days. Therefore, the question is the extent to which the situation has deteriorated in these past eight months and the extent to which he has been responsible for the deterioration.

The right hon. Gentleman may question it, but in my view there is no doubt that in the first of his three Budgets, in one way or another, he imposed costs on the corporate sector of the British economy of the order of £1.5 billion in the form of increased corporation tax, advance corporation tax, increases in nationalised industry prices and insurance contribution increases. Shortly afterwards, we had a toughening of the Price Code.

No one can have been surprised that these measures led to the damaging of corporate profits and the erosion of corporate liquidity. When all that is coupled with the language associated with the Secretary of State for Industry, with the regeneration of British industry and with the Green Paper that preceded it, it is not difficult to find reasons why not only profitability and liquidity were damaged but, what is even more critical, that confidence was destroyed.

My right hon. Friend the Member for Farnham (Mr. Macmillan) made the point vigorously, but it is within the memories of us all that the Chancellor of the Exchequer was warned of the consequences of what he did at the time that he did it. It is on record in his own words, because the right hon. Gentleman said on 1st April 1974 that he could see no reason why the mass of British industry should find itself short of money this coming year. That places beyond a shadow of doubt the warning that he was given, and the right hon. Gentleman ignored it. On that first and critical subject the Chancellor of the Exchequer bears a responsibility for the decisions that have had to be made in this Budget.

The case put to the House by the Chancellor of the Exchequer is one with which not only this economy but the economy of the entire world is familiar. The grave severity of the crisis has been described in great detail and in all its manifestations by hon. Member on both sides of the House. No one has any inclination to question the severity of the immediate and medium-term future for us all.

The second area of the Budget for which the Chancellor bears a responsibility is the way in which he sought to present the crisis in the period between his first election to his office and the result of the recent General Election being declared. I cannot tell the House that the right hon. Gentleman never said there was a crisis. I cannot tell the House that the right hon. Gentleman did not refer to many of the manifestations of that crisis. The dilemma was that there was no quotation, from any side of the problem, favourable or pessimistic, which, at some time, on some occasion, the Chancellor of the Exchequer did not use, and it is the fact that on any occasion the right hon. Gentleman had a different version of the truth, and that that has led to the confusion in the public mind about the degree of crisis that exists.

Nobody, when he looks back on this crisis—and let us be clear that we are not in a position to do other than look forward to it at the moment—will forget the words of the Chancellor when he sought to persuade the British people that the crisis was of such an order of magnitude that inflation was currently running at 8.4 per cent., or, perhaps even more serious, when he was able to say on 26th September that, in the past six months, on the balance of payments, on growth and on inflation our record had been improving and not deteriorating. No one in Britain can have had any doubt that those words were intended to tone down public awareness of the severity of the crisis that we shall have to face, and for that determined attempt to allay public anxiety the Chancellor bears a heavy and personal responsibility.

That is one psychological background against which the Chancellor has introduced his Budget, and my own feeling, having listened to the arguments, and having read much of the comment, is that probably the greatest single failure of the Chancellor of the Exchequer in presenting the Budget is in not bringing home to the men and women of Britain the exact dimension and depth of the crisis facing us.

I think it must frankly be said that the word "crisis" has been much overused. There is no political event of little significance, that is not, in someone's language, described as a crisis. We have all done it. The reality is that the public have heard us use the word year in and year out about issue after issue. Reference to a "crisis" in a debate in the House, or on a political platform, or even through the media, does not have the necessary impact on the British people and make them understand what all of us know to be the reality, namely, that there is coming an economic crisis that will transcend anything that we have experienced in contemporary life. The psychological background and approach of the Chancellor in presenting the Budget will be seen to have been one of the right hon. Gentleman's major misjudgments.

The Budget has to be coupled with the Queen's Speech because that, too, as we said at the time, could have been made by any Labour Government in any circumstances, in good times or in bad. In many ways, for all the impact that it had on the public, our criticism of the Queen's Speech applies to the Budget.

I hope that the Chancellor will tonight give the British people the full picture in language which means something in their ordinary lives and judgments. I hope that he will tell us exactly what price increases are to come from the nationalised industries and what sort of increases in the RPI we are to expect over the next few years. I hope that he will tell us what he thinks tolerable wage awards should be in industry today and what levels of unemployment are likely to result from the judgments which he and his colleagues have been forced to take.

If the right hon. Gentleman does not tell us these figures, as I fear he will not, the language within which he has tried to communicate the crisis which has dominated the headlines for one or two days will have gone. Instead, out will come a dribble of statistics—price increases here, changes in situations there—each one of which will be judged on its own, and not in the context of the crisis which faces the country. That will not make it easier for the British people to get to grips with the dimension of sacrifice which we will be expecting. It was the Sun newspaper which referred to the "time bomb" of crisis which the Chancellor has placed underneath us. We would be better prepared and more likely to respond if we were warned of the explosions and their nature in advance, rather than have to watch them going off in small bursts on a continuing basis.

The second judgment that the Chancellor has brought to this Budget is about its impact on industry. The first question I want to ask is in what way the Chancellor disagrees with the CBI's detailed and published calculations of the impact of economic changes on corporate liquidity and profitability over the last year or so. If the Chancellor disagrees with the CBI's claims that the deficiency will be of the order of £2,500 million in 1974–75 and £3,500 million in 1975–76 I do not know how we can give back to the CBI figures, on my calculations, of only about £1,000 million in each of those years without being prepared to tell them where they are wrong.

It would be credible if he argued upon figures. Simply to say "This is what I am prepared to do regardless of the validity of the thinking behind my judgment" is inadequate in the real dilemmas which face the British corporate situation. So there has been no explanation.

Another aspect of this judgment is the impact of the Chancellor's concessions on the companies themselves. We all realise that to try to make a hasty judgment of the precise effects of the amelioration in the Price Code, and of the tax holiday that he has given on stock appreciation, might be to misjudge the more sophisticated impact, but already the judgments are that he has done nothing like enough to bring back confidence and even the prospect of investment to British industry.

It must be clearly put on the record that the figure of £1,600 million which, according to some commentators, the Chancellor claims that he has given back to industry, has to be divided into two categories. There is, first, about £800 million of deferred taxation, which is in no way a return to industry of its cash but merely a balance sheet deferral of the liability. Companies which seek to borrow will find that that deferral will be regarded by the people from whom they seek to borrow as a real liability unless the Government can make it clear that it will not be so treated. Secondly, there is the possibility that prices will rise by some £800 million and, therefore, improve the cash resources of industry. I do not know—no one can know—whether in fact prices will be able to rise by that £800 million in the light of the market conditions which now prevail, and increasingly will prevail in this country, but even if we accept the figure of £800 million there are important areas in which that figure itself will be eroded.

First of all, we know that the increases in the cost of living—the retail price index—will be, over the course of the next 12 months, as a result of this Budget, about 4 per cent. Perhaps the Chancellor will tell us exactly. He has not told us. He has told us about the effect of the petrol price increase and something of the effect of the Price Code, but he has not told us about the nationalised industries' increased prices, or about rates, school meals and social security. The figure must be about four points on the RPI. That is what we can expect as a consequence of this Budget.

The effect of that will be to increase the wage demands which will follow because, as has been made perfectly clear, under the social contract wage demands follow price increases. Even under the revised code it is possible for industry to pass on only 80 per cent. of the increased costs through wages which will follow, so there is immediately a drag of 20 per cent. in the increases which will come from the Budget. This will have the effect of decreasing the £800 million that has been granted in the possibility of price increases. That is an ongoing situation.

The productivity deduction will not only affect the immediate grant of extra liquidity to companies, but it has, in some ways, an aspect about it which now calls the whole project into question. That is that if we are to see wage increases of the order of magnitude of 20 per cent., or somehing of that sort, over the next 12 months, that means that 16 per cent. of that will be passed on to the public in price increases and 4 per cent. will be met by the companies' productivity deduction. The money that the companies should have earned and retained from the productivity deduction for future investment and for the development of industry will have to be used, to the extent that I have outlined, in meeting the wage increases which, in part, will be created by this Budget. So there is a further deduction which could be of about £800 million if we were to see something like a 20 per cent. increase in wages in this country next year.

The third aspect of the Budget is the strategy that we should now switch to exports and to investment. Here again, I believe that it is very possible that the Chancellor has got the judgments wrong. He has certainly been more modest in his claims for exports than the OECD. He thinks that there will be a 5 per cent. increase in world trade, whereas the OECD talks in terms of 8 per cent. Against that one has got to see that those figures which relate to the overall world trading position must be put in the context of what British exporters think will happen to their prospects for growing world trade. The fact is that in the last few days we have seen the publication of the CBI figures, which show that British exporters believe, in reality, that their prospects of earning more overseas next year are worse than they have ever been since those sorts of figures were recorded.

Although no one would want to take one month's figures as in any way indicative of long-term trends what we must not lose sight of is the fact that exports have been price-led and not volume-led in recent months. So there are serious anxieties about suggesting that, simply because it is laid down by decree in the Budget that there shall be export switching we shall find the markets upon which the Chancellor is judging.

The second aspect of this third strategy is the diversion to investment. It is all very well for the Chancellor to say to British industry "I want to switch resources to investment." There is no one who would question the objective, but what will make British industry invest more in present circumstances? In the private sector, which is the most important sector for the purposes of my argument, there is only one motivating factor—the prospect of profitability, the prospect that people will earn a return on their investment and be allowed to keep it.

Here, too, the realities are frightening. Both in the Red Book and in the Government's figures on forward investment, published, conveniently, three days before the election, there was a degree of optimism. The CBI figures show deep and growing pessimism. Simply to say "Let there be investment" as if that will be enough to produce it is to misunderstand the fundamental nature of the capitalist system in this country. It is ludicrous to believe that industry, sitting there short of cash, is anxious to invest and that all that needs to be done is for it to be told to invest and all will be well. Industry is frightened because it cannot see where profits are coming from—[Interruption.]—Labour Members will not be laughing so loud in the months that lie ahead because the jobs of their constituents are at stake in this dialogue, and before they laugh they should listen to the Chancellor of the Duchy of Lancaster who spelled out the prospects this afternoon in a way that I could not improve upon.

Let me remind the House, since the Chancellor of the Duchy will not get another chance to speak, what the right hon. Gentleman said. His words should be heard more clearly than they were. He said that employment is at stake, that investment is at stake and that the situation of the Stock Exchange is now hopeless and must be rectified. That is the fundamental dilemma that faces the Labour Party now that it is entrusted with the management of the economy. If there are to be insufficient opportunities to earn profit and, therefore, attract investment there is only one alternative way of dealing with the situation, and that is by a proliferation of the weapons of State intervention in industry—total nationalisation, partial nationalisation and the National Enterprise Board, or, in part, perhaps even attempts to recycle some of the investment funds through the FFI scheme.

The Chancellor made a most profound observation when he said that one of the biggest shocks he had had since being in Government had been to find the total lack of sophistication in Whitehall to deal with the problems of managing an economy of this complexity. Would it not be more appropriate for him, instead of embarking upon a programme of extensive nationalisation and further encroachment of State ownership, to devote his attention to improving the machinery for managing the public sector than to extend that sector? That would be an appropriate way to divert the energies of the Secretary of State for Industry, a way that could be profitable to the Government and to the country.

We are, however, faced with the prospect of increasing nationalisation. How much finance is allowed in the Budget for that? Why cannot the Chancellor explain the implications of the cost of nationalising the shipbuilding and aircraft manufacturing industries? How much will he make available for the National Enterprise Board to come to the rescue of companies which are in the liquidity situation he so eloquently described? How much money is involved? When Labour Members hear of the sums necessary they will realise how totally inadequate these proposals will be to bring about the regeneration of industry which is necessary and which is alluded to in the documents but which is totally outside the realms of anything the Government will be able to achieve.

The reality is that we probably have the worst of both worlds—a partly capitalist system without a capital market and a partly Socialist system run by a Government who admit that they have not the skill to do it.

If the large companies are in trouble, the small companies are in even greater trouble, because they have not the reserves or the resources to match up to the crisis with which they are confronted. There are 1½ million people employed in the small companies; 25 per cent. of the national employment is centred upon them, and they produce 20 per cent. of the gross national product. The rate of bankruptcy in them, which is one measurement of the problems confronting them, is now about 35 per cent. higher than it was a year ago.

What has the Chancellor of the Exchequer done for the small companies? He has promised them what he fondly refers to as a bankable assurance, and nothing else. Therefore, people who have had to face rate increases of about 100 per cent., who have been told that there are no administrative methods by which their stock problems can be recognised and who have had to face the proposed increases in national insurance contributions are left with nothing more than vague assurances of something to be delivered at an imprecise time, something that will do nothing to maintain their ability to preserve employment and to get on with trying to do the things their businesses are designed to do, particularly in agriculture and building and in the small shopkeeping sector.

If there is one underlying anxiety about the Budget it is about the lack of precision about the whole question of the social contract. Underlying all the Chancellor's assumptions is the question of the country's ability to come to grips with the rate of inflation, a rate which the Prime Minister has said—so we do not need to question it—is now dependent on the rate of wage increases being negotiated and settled throughout the country. We are told that there is no way in which the country can expect to overcome its problems except through the guidelines of the social contract. The social contract is the basic strategy upon which the Budget and all the Government's policies depend.

Therefore, it is a matter of concern to hon. Members that there has never been an instrument of government so divorced from parliamentary control and answerability. There has never been an opportunity for hon. Members to debate the social contract. If they ask for details they are referred to two Labour Party documents in the Library. If they ask whether the social contract is succeeding they are told that it is not the job of Ministers to monitor it.

If there is one reason why the Budget will be seen to have failed, it is that the social contract is now the excuse within which the largest wage explosion in our history is being carried on without any attempts to bring it under control.

9.29 p.m.

The Chancellor of the Exchequer (Mr. Denis Healey)

We have had an exceptional number of good maiden speeches in the debate. I should like to mention in particular the two we have heard today. I refer first to that of my hon. Friend the Member for Hemel Hempstead (Mr. Corbett), who concentrated on an issue that is likely to dominate our thinking increasingly over the coming years, the question of waste in our economy. We look forward to hearing my hon. Friend many more times as the weeks pass.

I congratulate, too, the right hon. Member for Finchley (Mrs. Thatcher), who in a sense also made a maiden speech this afternoon. I hope I do not embarrass the right hon. Lady by saying that I found her speech witty, good-humoured, weighty and penetrating, and I look forward to crossing swords with her many times in the years to come.

I referred in my speech to the unreliability of forecasts, but I am glad to say that I am an exception. I forecast on Tuesday that I would not satisfy anybody completely. I was 100 per cent. right at least in that.

Much of our debate has focused on measures for improving the financial position of companies. I have been attacked on the one hand for giving companies too much or giving it in the wrong way and on the other hand for not giving them enough. I must confess that I feel that if I stand somewhere midway between Mr. Campbell Adamson and my hon. Friend the Member for Tottenham (Mr. Atkinson) I am probably just about right.

I wish to deal with some of the questions which have been raised on both sides of the House about the assistance I am giving in the Budget to the company sector. First of all let me deal with the reason. The reason is stark and simple: it is to protect jobs this winter. Over seven out of 10 men and women who work in Britain work in the private sector, and unless I were giving help urgently in this Budget there would be a real danger of many of those seven men and women being laid off, being made redundant, with the firms they work for becoming bankrupt or cutting output. Nobody in the House has attempted to dispute the reality of that danger.

Some Opposition Members have attempted to make out that the difficulties have all been caused by the measures I took in March. But the total burden I then imposed on companies was just over £400 million—£100 million in increased corporation tax and ACT and over £300 million in the surcharge on ACT. The increases in national insurance contributions and nationalised industry prices have never been disputed on either side of the House and were in any case passed on in prices. They were allowable costs under the Price Code. In other words, the additional burden imposed on industry in my March Budget was only about 10 per cent. of what the CBI claims the total financial deficit of the company sector is likely to be in the present year.

I did not change those decisions which I took in March, first because the present rates of company taxation in Britain are broadly in line with those of our main competitors overseas—the United States, France and Germany; secondly, because cuts in corporation tax would give business relief only over the next two years and business needs relief now; thirdly, because I do not believe, as I made clear on Tuesday, in giving indiscriminate relief through tax cuts above the board and taking no account of the specific needs of the firms concerned; and finally because increasing the amount of investment is one of my basic purposes and any reduction in the rate of corporation tax reduces the value as an incentive of tax allowances offered for investment.

I chose relief on stock appreciation because it is simple and immediate and is directly related to one important element of the problem. I recognised that it was not possible to carry out immediate relief to cover companies with closing stocks below £25,000 in value. [HON. MEMBERS: "Why?"] The reason I explained on Tuesday, but I will explain it again because the right hon. Lady asked me questions about it. The fact is that we want relief made available in the next few months. As the right hon. Lady fairly admitted, although some of the facts required to calculate the value el these reliefs are available in normal revenue returns, it would require many thousands more persons working in the Revenue to pay out those moneys in the next few months. There is no possibility whatever of recruiting staff of the quality and in the numbers required in time to make these payments quickly.

What I can say is what my right hon. Friend the Chancellor of the Duchy of Lancaster said today. I have given an absolute assurance that companies which are not covered by this winter's reliefs will receive double relief next year, with something to compensate for the fact that they have had to wait for the first year's relief. The amount of relief to which they arc due will be easily calculable by their accountants, and I shall do everything in my power to ensure that it is taken into account by all concerned, including their bankers. I can go no further on that.

I want to say something about what I have done about the Price Code. I have not abolished the productivity deduction altogether, because that is an essential element in price control and also an essential element in the social contract, since it enables the Government to maintain some discipline over wage settlements in the private sector. Moreover, as the right hon. Member for Finchley made clear, even if it had been totally abolished many companies might have been unable to take advantage of this fact by raising prices, either because of the competition to which they are being subjected or because of consumer resistance.

Therefore, as my right hon. Friend the Secretary of State for Prices and Consumer Protection made clear yesterday, I related the reliefs under the Price Code as nearly as possible, given the nature of the code, in some cases to the amount of labour employed and in other cases to the amount of investment carried out, an amount which will be monitored steadily throughout the year.

I told the House frankly on Tuesday that the adjustments which I have proposed in the Price Code, which will be fully debated at a later stage, will add about 1 per cent. to the retail price index compared with what would happen if current profit margins were maintained. I believe, however, that the majority of working people in Britain will be prepared to pay that extra penny in the pound out of their weekly earnings rather than live on the dole, which for many of them would have been the only alternative.

Secondly, as we have made clear, increases in the retail price index will be taken into account in wage settlements under the social contract, a point to which the hon. Member for Henley (Mr. Heseltine) paid some attention.

The total help available to companies under these two measures will be about £1.5 billion. Half of that will be immediate help in liquidity—that is, the relief on stock appreciation—and half will be an increase in profitability over the next 12 months.

But some say that that is not enough. The hon. Member for Henley quoted the statement by the CBI. I have been in discussion with the CBI on this matter for many weeks. I have been given many different figures by the CBI—for example, for the size of the company deficit—but whereas the CBI spokesman was reported yesterday in the Evening Standard as saying that I am giving only half of what is needed, the chairman of the CBI taxation committee, Mr. Douglas Morpeth, a distinguished accountant well known to many of us, said that I was giving two-thirds, and he confirmed what I had said, that the companies will get £800 million through the Price Code changes and £800 million through the changes in corporation tax. I hope that in time other members of the CBI Council will take the opportunity to talk to their accountants, when they will find that what Mr. Morpeth tells them is the truth.

It may well be that this sum will not cover the whole of the company deficit. I believe that companies can cover and finance the remainder. I believe that they should be required to do so at this time of national difficulty.

I have given companies an immense new source of financial assistance by approving the Governor of the Bank of England's efforts in extending the resources of Finance for Industry. We hope to be able to lend to productive industries about £1,000 million over the next two years. I must make it clear that these funds, and the organisation Finance for Industry through which they are collected and dispersed, will be entirely private. There will be no Government contribution to those funds and there will be no Government guarantee. As my right hon. Friend made clear, this new facility is a shift in lending from short term to medium term. That is vital if manufacturing industry is to be able to increase its investment plan.

The main sources of the new funds for Finance for Industry will be insurance companies and pension funds. In the past they have invested far too much of their money in the financial sector or in property. As matters finally turned out, that was much to their disadvantage. I have always felt that it should be an objective of a Labour Government to ensure that these immense sums were more readily available for investment in productive industry. That is the purpose and intention—and I believe it will be the achievement—of this expansion in Finance for Industry. I believe that it will be strongly in the interests of the financial institutions themselves.

My hon. Friend the Member for Greenwich (Mr. Barnett) and the right hon. Member for Finchley asked me about the interests of the beneficiaries of the pension funds and insurance companies. They asked about the security of any borrowings that might be made. The security of the contributions advanced by insurance companies and pension funds will be on a debenture or loans stock basis. Only the collapse of the FFI would place them at risk. Risks associated with individual investments are borne by the equity shareholders of FFI—namely, clearing banks and the Bank of England.

The shareholders will subscribe additional equity capital as necessary to match the expansion of business. That does not involve a call on public money money.

Mr. James Prior (Lowestoft)

Anything to liven up the proceedings. Will the right hon. Gentleman comment on the statement of the Secretary of State for Prices and Consumer Protection about the penalties for companies which pay out more money than the social contract allows in wage increases? Will he give one example of where a company has done that?

Mr. Healey

I can give such an example—namely, the ICI settlement in the north of England not so long ago. Further examples are the many settlements made by the clearing banks and some insurance companies during the summer. My right hon. Friend was extremely careful in making it clear that the thirteenth paragraph of the consultative document indicated that the Government would be prepared to consider an alternative approach if it proved acceptable to both sides of industry. I suggest that the right hon. Member for Lowestoft (Mr. Prior), whom I do not think has attended any other part of the debate, reads what my right hon. Friend said yesterday. In particular, I suggest that he reads the consultative documents to which she was referring.

I now resume my even tenor. The provision of new funds for lending to productive industry through FFI in no way pre-empts any decision which may be made when the National Enterprise Board has been set up to make public money available, to provide money to industry and to insist on returns from industry in the form of disclosure, or for public money to have a share in the equity capital or the other returns which are listed in the White Paper "The Regeneration of Industry". The steps which I have announced in the Budget are designed to creates an environment in which firms which employ seven out of 10 of all men and women in this country can continue to offer them work, to increase their productivity and thereby increase their wages.

Mr. Gorst

As regards the FFI, can the right hon. Gentleman give an undertaking that firms which make an investment will not be subject to later tampering or take-over by the NEB?

Mr. Healey

Of course, I cannot give any assurance of that nature. I do not think any member of the present Opposition Front Bench could have given an assurance in 1970 that they would not be taking over Rolls-Royce within 12 months.

I now pass to another major area which has been discussed on both sides of the House—the increase in nationalised industry prices which will be required to eliminate price subsidies in the nationalised industries. The right hon. Member for Carshalton (Mr. Carr) and the right hon. Lady the Member for Finchley asked me why I have not given a detailed list. Let me make clear why this is. First, it is not proposed to make this adjustment, painful and disagreeable as it will be, in one step. I know the right hon. Lady conceded that this would be unwise and, indeed, impossible. We certainly proposed to complete the process within the four years of which I was speaking, and I hope that we can complete it a good deal sooner.

My hon. Friend the Member for Greenwich asked me whether we were likely to embark on this new path before pensions and other benefits were uprated in April. The answer is "No". But some particular increases are likely to take place before then, particularly one in gas in the New Year and one in domestic electricity charges which will be required to be passed on to take account of the increase in fuel costs which have already occurred. But these increases have yet to be demanded by the industries themselves and will be subject to agreement by the Price Commission.

I was asked by the right hon. Lady why, if I could list increases in March, I cannot do it now. I will tell her. The reason is that when we entered office in March I found in my "in" tray a whole pile of applications from the nationalised industries for price increases, which had been piling up for weeks and in some cases for months, since before the election. One of the most urgent steps was to decide what was to be done. No applications of that nature are now pending. We shall be getting them in the light of the movement of labour and industrial costs and we shall decide how to phase them in the light of our general responsibility to the country and to the economy.

I have made it quite clear that these increases will be substantial. But the Government regard it as their obligation under the social contract to help those who are worst off to cope with the consequences of these increases. Let me say that I hope that the Opposition, which welcomed the decision to increase these prices in principle, will not, as they did in the past eight months, attack every single one in practice for purely party purposes.

Let me now say a word about the main case mounted by the Opposition in the past three days. I will say nothing of the shrill and hysterical humbug which we had from the Leader of the Opposition on Tuesday evening in the fit of instant "aggro" to which he subjected the House, because we all know that he was under some strain. Never was a general deserted so fast, not only by his troops but by his divisional commanders too. The tone of the speeches by the right hon. Member for Carshalton, the hon. Member for Guildford (Mr. Howell), the right hon. Member for Finchley and even, God be praised, the hon. Member for Henley tonight, in their moderation and reasonableness presented an extraordinary and to me agreeable contrast with the graceless tone of the Leader of the Opposition's speech.

Although all the other Opposition speakers in the debate had this reasonable moderation in common, they had one other thing in common. While they have just emerged from a General Election which was fought on the very issues we have been discussing during the past three days, when they were purporting to present a policy which a Conservative Government might be able to carry out, we had no suggestion from any Opposition speaker of a total approach to the nation's problem, an approach which would reconcile the five key objectives I mentioned the other day—full employment, growth, social justice, stable prices and external confidence.

I must confess that, like many hon. Members, I was disappointed that we did not hear during this debate from some of those Tory Members who expressed their views during the General Election. The right hon. Member for Leeds, North-East (Sir K. Joseph), for example—[HON. MEMBERS: "Where is he?"]—pointed out during the election that, to quote from a letter he wrote to The Economist: We had an historic high rate of inflation, an enfeebled economy, the worst relations with the trade union movement in decades and a lost Election with the greatest fall in our share of the vote since 1929. Surely"— he asked, and he was addressing his Conservative friends in this question— this was sufficient incentive to rethink. Unfortunately we have had no example from him of his rethinking during the discussions in the past three days.

It is a pity that we have had no help from the hon. Member for St. Ives (Mr. Nott), who was Minister of State at the Treasury until the end of February this year. He reminded us the other day, outside this House, that when he joined the Treasury in early 1972 We were engaged on a constant struggle to hold back the growth in the money supply. But the die was cast. The Cabinet had already decided to run a massive Budget deficit and then was unwilling to allow the necessary rise in interest rates to finance the borrowing requirement. How much our debates would have been enlightened in the past three days by a contribution from the hon. Member.

Unfortunately, the only coherent and comprehensive policy which was given to us did not come from the Opposition Front Bench. It came this evening in a remarkable speech from the right hon. Member for Down, South (Mr. Powell), who has clearly, if I may say so, in moving from London to Northern Ireland, also moved a long way from Chicago towards Cambridge in economics.

I was fascinated as the right hon. Gentleman spoke—I know that his hon. Friends will appreciate this—to observe the alert, vigilant intelligence with which his colleagues of the United Ulster Unionist Party watched him deliver a speech which, I hope I am right in inferring from what he said about his party's manifesto, they had actually written for him.

From the Opposition Front Bench, all we had was what I suppose one could call, in Britain as in the United States, the "old-time religion", a mish-mash of incompatible and half-understood ideas which led the Conservative Government through innumerable U turns into catastrophe at the beginning of this year.

The right hon. Member for Carshalton and the Leader of the Opposition told us that we must cut personal consumption, not maintain it. They said that we must not increase public expenditure but hold it fast. That would mean cutting £900 million a year off the expenditure plans published in the Conservative Government's expenditure White Paper which was referred to by the right hon. Member for Finchley. At the same time, however, they told us that we must not touch defence expenditure, which under Conservative plans, was to he increased by £400 million in the next year. We were told that we must give industry all it asked for, which would add another £1,500 million to the public expenditure. We were told that we must help agriculture on a large scale, that we must help construction on a large scale, and that we must give all sorts of additional social security benefits. I was surprised that the right hon. Member for Finchley did not refer to her great triumph: that we must also hold mortgages at 9½ per cent. and cut the rates.

To carry out these policies without increasing total public expenditure would mean reducing other programmes by at least £3,000 million a year. Those cuts would have to come off schools and education, and investment for the future in our nationalised industries.

At the same time the Opposition Front Bench asked us to cut consumption, presumably by increasing prices or increasing personal taxation. The Opposition Front Bench in the debate have had nothing to offer the country but a return to the policies which failed so castastrophically last time they were tried and which led to the consequences described so accurately by the right hon. Member for Leeds, North-East in the letter from which I quoted. The last time a Government followed those policies they produced the worst inheritance an incoming Government have ever had to carry, the inheritance which faced us in March this year.

My Budget attempts to provide a basis for a return to solvency. I know that it will be unpopular, but I believe that it gives the nation a real chance not only of keeping on its feet in the present crisis but of enabling Britain for the first time since the war to move up in the international league table. On all those grounds I ask the House to approve it.

Question put and agreed to.

Resolved, That a tax may be imposed on the value transferred by certain dispositions made on or after 26th March 1974 and on the value treated on death and in certain other circumstances as so transferred.

Mr. Speaker

I am now required, under Standing Order No. 94(2) to put successively without further debate the Question on each of the Ways and Means motions numbers 2 to 19, on the two procedure motions and on the motion relating to Finance (Money), on all of which the Finance Bill is to be brought in. Instead of reading out each motion in extenso I propose to follow the procedure used in recent years; that is to say, I will first state the title of a motion and then put simply the Question "That the motion be agreed to."

2. DEATH DUTIES

Motion made, and Question, That provision may be made for the abolition of estate duty under the law of Great Britain and Northern Ireland and, in relation to deaths occurring after 12th November 1974, for excluding or modifying certain reliefs and reducing the rates chargeable; for interest on sums paid in excess of those due in respect of duty; and for the final abolition of certain obsolete death duties.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

3. TAX ON CAPITAL GAINS

Motion made, and Question, That provision may be made for amending the enactments relating to capital gains tax and corporation tax on chargeable gains—

1. (a) in connection with the replacement of certain provisions relating to estate duty by different provisions relating to capital transfer tax; and
2. (b)in relation to appeals.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

4. VALUE ADDED TAX (EIGHT PER CENT.

RATE)

Motion made, and Question, That, as from 18th November 1974, section 9 of the Finance Act 1972 be amended as follows—

1. (a) in subsection (1), for the word 'ten' there shall be substituted the word 'eight'; and
2. (b) subsection (2) shall be omitted;

and that, in consequence of the amendment mentioned in paragraph (a) above, the Value Added Tax (Change of Rate) Order 1974 be revoked on that date. And it is here by declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Halley.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

5. VALUE ADDED TAX (SPECIAL RATE FOR LIGHT HYDROCARBON OILS ETC.)

Motion made, and Question put forthwith pursuant to Standing Order No. 94 (Ways and Means motions):— That, as from 18th November 1974, the rate of value added tax chargeable on the supply or importation of any light oil, petrol substitute or power methylated spirits (within the meaning of the Hydrocarbon Oil (Customs & Excise) Act 1971) shall be 25 per cent., but nothing in this Resolution— (a) shall affect the rate of value added tax chargeable on the supply or importation of light oil in containers of a capacity

not exceeding 20 fluid ounces, where the oil is intended for sale in those containers solely as fuel for mechanical lighters; or

• (b) shall apply to any goods of a description for the time being specified in Schedule 4 to the Finance Act 1972 (zero-rating).

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Mr. Healey]: —

The House divided: Ayes 302, Noes 44.

Division No. 7.]	AYES	[10.0 p.m.
Abse, Leo	Davis, S. Clinton (Hackney C)	Horam, John
Allaun, Frank	Deakins, Eric	Hoyle, Douglas (Nelson)
Anderson, Donald	Dean, Joseph (Leeds West)	Huckfield, Leslie
Archer, Peter	Delargy, Hugh	Hughes, Rt Hon C. (Anglesey)
Armstrong, Ernest	Dell, Rt Hon Edmund	Hughes, Mark (Durham)
Ashley, Jack	Dempsey, James	Hughes, Robert (Aberdeen N)
Ashton, Joe	Doig, Peter	Hughes, Roy (Newport)
Atkins, Ronald (Preston N.)	Dormand, Jack	Hunter, Adam
Atkinson, Norman	Douglas-Mann, Bruce	Irvine, Rt Hon Sir A. (L'pool)
Bagier, Gordon A. T.	Duffy, A. E. P.	Irving, Rt Hon S. (Dartford)
Barnett, Guy (Greenwich)	Dunn, James A.	Jackson, Colin (Brighouse)
Barnett, Joel (Heywood)	Dunnett, Jack	Jackson, Miss Margaret (Lincoln)
Bates, Alf	Dunwoody, Mrs. G. P.	Janner, Greville
Bean, Robert E.	Eadie, Alex	Jay, Rt Hon Douglas
Benn, Rt Hn Anthony Wedgwood	Edelman, Maurice	Jeger, Mrs Lena
Bennett, A. (Stockport North)	Edge, Geoffrey	Jenkins, Hugh (Wandsworth)
Bidwell, Sydney	Edwards, Robert (Wolv SE)	Jenkins, Rt Hon Roy (B'ham St)
Bishop, Edward	Ellis, John (Brigg & Scun.)	John, Brynmor
Blenkinsop, Arthur	Ellis, Tom (Wrexham)	Johnson, James (Kingston W)
Boardman, H.	Ennals, David	Jones, Barry (East Flint)
Booth, Albert	Evans, Fred (Caerphilly)	Jones, Dan (Burnley)
Bottomley, Rt Hon Arthur	Evans, Ioan L. (Aberdare)	Jones, Alec (Rhondda)
Boyden, James (Bish Auck)	Evans, John (Newton)	Judd, Frank
Bradley, Tom	Ewing, Harry (Stirling)	Kaufman, Gerald
Bray, Dr Jeremy	Faulds, Andrew	Kelley, Richard
Broughton, Sir Alfred	Fernyhough, Rt Hon E.	Kerr, Russell
Brown, Hugh D. (Glasgow, Pr)	Fitch, Alan (Wigan)	Kilroy-Silk, Robert
Brown, Robert C. (Newcastle)	Fitt, Gerard (Belfast)	Kinnock, Neil
Brown, Ronald (Hackney S)	Flannery, Martin	Lambie, David
Buchan, Norman	Fletcher, Raymond (likeston)	Lamborn, Harry
Buchanan, Richard	Fletcher, Ted (Darlington)	Lamond, James
Butler, Mrs. Joyce (Haringey)	Foot, Rt Hon Michael	Latham, Arthur (Paddington)
Callaghan, Rt Hon J. (Cardiff S)	Ford, Ben T.	Leadbitter, Ted
Callaghan, Jim (Middleton & P)	Forrester, John	Lee, John
Campbell, Ian	Fowler, Gerald (The Wrekin)	Lestor, Miss J. (Eton & Slough)
Canavan, Dennis	Fraser, John (Lambeth N)	Lever, Rt Hn Harold
Cant, R. B.	Freeson, Reginald	Lewis, Arthur (Newham N.)
Carmichael, Neil	Garrett, John (Norwich S)	Lewis, Ron (Carlisle)
Carter, Ray	Garrett, W. (Wallsend)	Lipton, Marcus
Carter-Jones, Lewis	George, Bruce	Litterick, Tom
Cartwright, John	Gilbert, Dr John	Lomas, Kenneth
Castle, Rt Hon Barbara	Ginsburg, David	Loyden, Eddie
Clemitson, I. M.	Golding, John	Luard, Evan
Cocks, Michael (Bristol S)	Gould, Bryan	Lyons, Edward (Bradford W.)
Cohen, Stanley	Gourlay, Harry	McCartney, Hugh
Coleman, Donald	Graham, Ted	McElhone, Frank
Colquhoun, Mrs. Maureen	Grant, George (Morpeth)	McGuire, Michael (Ince)
Conlan, Bernard	Grant, John (Islington C.)	Mackenzie, Gregor
Cook, Robin F. (Edin. C.)	Grocott, Bruce	Mackintosh, John P.
Corbett, Robin	Hamilton, James (Bothwell)	Maclennan, Robert
Craigen, J. M. (Glasgow, M)	Hamilton, W. W. (Central Fife)	McMillan, Tom (Glasgow C.)
Crawshaw, Richard	Hamling, William	McNamara, Kevin
Cronin, John	Hardy, Peter	Madden, Max
Crosland, Rt Hon Anthony	Harper, Joseph	Magee, Bryan
Cryer, G. R.	Harrison, Walter (Wakefield)	Mahon, Simon
Cunningham, G. (Islington S)	Hart, Rt Hon Judith	Mallalieu, J. P. W.
Cunningham, Dr J. (Whiteh)	Hattersley, Roy	Marquand, David
Dalyell, Tam	Hatton, Frank	Marshall, Dr Edmund (Goole)
Davidson, Arthur	Hayman, Mrs. Helene	Marsha, Jim (Leicester S)
Davies, Bryan (Enfield N)	Healey, Rt Hon Denis	Mason, Rt Hon Roy
Davies, Denzil (Llanelli)	Heffer, Eric S.	Maynard, Miss Joan
Davies, Ifor (Gower)	Hooley, Frank	Meacher, Michael
Mellish, Rt Hon Robert	Roberts, Albert (Normanton)	Thomas, Ronald (Bristol NW)
Mendelson, John	Roberts, Gwilym (Cannock)	Thorne, S. G. (Preston)
Mikardo, Ian	Robertson, John (Paisley)	Tierney, Sydney
Millan, Bruce	Rodgers, George (Chorley)	Tinn, James
Miller, Dr M. (E. Kilbride)	Rodgers, William (Teesside)	Tomlinson, J.
Miller, Mrs Millie (Redbridge)	Rooker, J. W.	Tomney, Frank
Mitchell, R. C. (Soton, Itchen)	Roper, John	Torney, Tom
Molloy, William	Rose, Paul B.	Tuck, Raphael
Moonman, Eric	Ross, Rt Hon W. (Kilm'nock)	Urwin, T. W.
Morris, Alfred (Wythenshawe)	Rowlands, Ted	Varley, Rt Hon Eric G.
Morris, Charles R. (Openshaw)	Ryman, John	Wainwright, Edwin (Dearne V)
Morris, Rt Hon J. (Aberavon)	Sandelson, Neville	Walden, Brian (B'ham, L'dyw'd)
Moyle, Roland	Sedgemore, B.	Walker, Harold (Doncaster)
Mulley, Rt Hon Frederick	Selby, Harry	Walker, Terry (Kingswood)
Murray, Ronald King	Shaw, Arnold (Redbridge, Ilf)	Ward, M.
Newens, S.	Sheldon, R. (Ashton-u-Lyne)	Watkins, David
Noble, Mike	Shore, Rt Hon Peter	Watkinson, John
Oakes, Gordon	Short, Rt Hon E. (Newcastle C)	Weetch, Ken
Ogden, Eric	Short, Mrs R. (Wolv NE)	Weitzman, David
O'Halloran, Michael	Silkin, Rt Hn John (Lewish)	White, Frank (Bury)
O'Malley, Brian	Silkin, Rt Hn S. C. (Southwk)	White, James (Glasgow P)
Orbach, Maurice	Sillars, James	Whitehead, Phillip
Ovenden, J.	Silverman, Julius	Whitlock, William
Owen, Dr David	Skinner, Dennis	Willey, Rt Hon Frederick
Padley, Walter	Small, William	Williams, Alan (Swansea)
Palmer, Arthur	Smith, John (N Lanarkshire)	Williams, A. L. (Havering)
Park, G.	Snape, Peter	Williams, Rt Hn Mrs S. (Hertford)
Parker, John	Spearing, Nigel	Williams, W. T. (Warrington)
Parry, Robert	Spriggs, Leslie	Wilson, Alexander (Hamilton)
Peart, Rt Hon Fred	Stallard, A. W.	Wilson, Rt Hon H. (Huyton)
Pendry, Tom	Stoddart, David	Wilson, William (Coventry SE)
Perry, Ernest	Stonehouse, Rt Hn John	Wise, Mrs. Audrey
Phipps, Dr C.	Stott, Roger	Woodall, A.
Prentice, Rt Hon Reg	Strang, Gavin	Woof, Robert
Prescott, John	Strauss, Rt Hon G. R.	Wrigglesworth, Ian
Price, C. (Lewisham W.)	Summerskill, Hon Dr Shirley	Young, David (Bolton E)
Price, William (Rugby)	Swain, Thomas
Radice, Giles	Tayor, Mrs Ann (Boton W)	TELLERS FOR THE AYES:
Rees, Rt Hon Merlyn (Leeds S)	Thomas, Jeffrey (Abertillery)	Mr. Thomas Cox and
Richardson, Miss Jo	Thomas, Mike (Newcaste)	Mr. Walter Johnson.
NOES
Bain, Mrs Margaret	Henderson, Douglas	Ross, Stephen (Isle of Wight)
Boscawen, Hon Robert	Hicks, Robert	Smith, Cyril (Rochdale)
Clark, Alan (Plymouth S)	Hooson, Emlyn	Stewart, Donald (Western Isles)
Corrie, John	Howells, Geraint (Cardigan)	Taylor, Teddy (Glasgow, C)
Crawford, Dougas	Hutchison, Michael Clark	Thompson, George
Douglas-Hamilton, Lord James	Kellett-Bowman, Mrs. Elaine	Thorpe, Rt Hon Jeremy (Devon)
Evans, Gwynfor (Carmarthen)	Kilfedder, James	Wainwright, R. (Colne Valley)
Ewing, Mrs Winifred (Moray)	MacCormick, Iain	Watt, Hamish
Fairbairn, Nicholas	Maxwell-Hyslop, Robin	Welsh, Andrew
Fairgrieve, Russell	Mills, Peter	Wigley, Dafydd (Caernarvon)
Fell, Anthony	Monro, Hector	Wilson, Gordon (Dundee E)
Freud, Clement	Morgan, Geraint	Winterton, Nicholas
Fry, Peter	Mudd, David
Gilmour, Sir John (East Fife)	Pardoe, John	TELLERS FOR THE NOES:
Gower, Sir Raymond (Barry)	Penhaligon, David	Mr. David Steel and
Gray, Hamish	Roberts, Wyn (Conway)	Mr. D. E. Thomas.
Grimond, Rt Hon J.

Question accordingly agreed to.

6. VALUE ADDED TAX (REFUNDS TO CERTAIN INTERNATIONAL ORGANISATIONS, DIPLOMATIC AGENTS AND CONSULAR OFFICERS ETC. IN RESPECT OF TAX ON HYDROCARBON OIL BOUGHT IN THE UNITED KINGDOM)

Motion made, and Question, That it is expedient to make provision for securing that, in cases where, by virtue of section 8 of the Consular Relations Act 1968, Schedule 1 to the International Organisations Act 1968 or section 1 of the Diplomatic and Other Privileges Act 1971, arrangements exist for securing the refund of customs duty paid on the importation of hydrocarbon oil, those arrangements may also make provision for the refund of value added tax becoming chargeable on that importation.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

7. VALUE ADDED TAX (REFUNDS TO

PERSONS CONSTRUCTING DWELLINGS OTHERWISE THAN IN THE COURSE OF A BUSINESS)

Motion made, and Question, That it is expedient to make provision for Government might be able to carry out a dwelling otherwise than in the course of a business carried on by him of value added tax becoming chargeable, on or after 13th November 1974, on supplies to him and importation by him of goods which are incorporated in the dwelling or its site or in any garage intended to be occupied together with the dwelling and are of such a nature that, if he were a taxable person constructing the dwelling for the purpose of granting a major interest in it, within the meaning of section 5(6) of the Finance Act 1972, he would be entitled to deduct that value added tax as input tax.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

8. INCOME TAX (ALTERATION OF

ADDITIONAL RATES FOR 1974–75)

Motion made, and Question put forthwith pursuant to Standing Order No. 94 (Ways and Means motions):

That section 7(1) of the Finance Act 1974 (charge of income tax for 1974–75) shall have effect with the substitution for paragraph (b) of the following provisions, that is to say—

• (b) in respect of so much of the investment income included in an individual's total income as exceeds £1,000 at the additional rates of 10 per cent. for the first £1,000 of the excess and 15 per cent. for the remainder;

except that, in the case of an individual who shows that, at any time within that year, his age or that of his wife living with him was sixty-five years or more, income tax at the additional rate of 10 per cent. shall not be charged in respect of the first £500 of the excess mentioned in paragraph (b) above.'.

And it is here by declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968. —[Mr. Healey.]

The House divided: Ayes 306, Noes 279.

Division No. 8.]	AYES	[10.13 p.m.
Abse, Leo	Cox, Thomas (Wands Toot)	Garrett, John (Norwich S)
Allaun, Frank	Craigen, J. M. (Glasgow, M)	Garrett, W. (Wallsend)
Anderson, Donald	Crawshaw, Richard	George, Bruce
Archer, Peter	Cronin, John	Gilbert, Dr John
Armstrong, Ernest	Crosland, Rt Hon Anthony	Ginsburg, David
Ashley, Jack	Cryer, G. R.	Golding, John
Ashton, Joe	Cunningham, G. (Islington S)	Gould, Bryan
Atkins, Ronald (Preston N.)	Cunningham, Dr J. (Whiteh)	Gourlay, Harry
Atkinson, Norman	Dalyell, Tam	Graham, Ted
Bagier, Gordon A. T.	Davidson, Arthur	Grant, George (Morpeth)
Barnett, Guy (Greenwich)	Davies, Bryan (Enfield N)	Grant, John (Islington C.)
Barnett, Joel (Heywood)	Davies, Denzil (Llanelli)	Grocott, Bruce
Bales, Alf	Davies, Ifor (Gower)	Hamilton, James (Bothwell)
Bean, Robert E.	Davis, S. Clinton (Hackney C)	Hamilton, W. W. (Central Fife)
Benn, Rt Hn Anthony Wedgwood	Deakins, Eric	Hamling, William
Bennett, A. (Stockport North)	Dean, Joseph (Leeds West)	Hardy, Peter
Bidwell, Sydney	Delargy, Hugh	Harrison, Walter (Wakefield)
Bishop, Edward	Dell, Rt Hon Edmund	Hart, Rt Hon Judith
Blenkinsop, Arthur	Dempsey, James	Hattersley, Roy
Boardman, H.	Doig, Peter	Hatton, Frank
Booth, Albert	Dormand, Jack	Hayman, Mrs Helene
Bottomley, Rt Hon Arthur	Douglas-Mann, Bruce	Healey, Rt Hon Denis
Boyden, James (Bish Auck)	Duffy, A. E. P.	Heffer, Eric S.
Bradley, Tom	Dunn, James A.	Hooley, Frank
Bray, Dr Jeremy	Dunnett, Jack	Horam, John
Broughton, Sir Alfred	Dunwoody, Mrs G. P.	Hoyle, Douglas (Nelson)
Brown, Hugh D (Glasgow, Pr)	Eadie, Alex	Huckfield, Leslie
Brown, Robert C. (Newcastle)	Edelman, Maurice	Hughes, Rt Hon C. (Anglesey)
Brown, Ronald (Hackney S)	Edge, Geoffrey	Hughes, Mark (Durham)
Buchan, Norman	Edwards, Robert (Wolv SE)	Hughes, Robert (Aberdeen N)
Buchanan, Richard	Ellis, Tom (Wrexham)	Hughes, Roy (Newport)
Butler, Mrs Joyce (Haringey)	Ennals, David	Hunter, Adam
Callaghan, Rt Hon J. (Cardiff S)	Evans, Fred (Caerphilly)	Irvine, Rt. Hon Sir A. (L'pool)
Callaghan, Jim (Middleton & P)	Evans, Gwynfor (Carmarthen)	Irving, Rt Hon S. (Dartford)
Campbell, Ian	Evans, Ioan L. (Aberdare)	Jackson, Colin (Brighouse)
Canavan, Dennis	Evans, John (Newton)	Jackson, Miss Margaret (Lincoln)
Cant, R. B.	Ewing, Harry (Stirling)	Janner, Greville
Carmichael, Nell	Faulds, Andrew	Jay, Rt Hon Douglas
Carter, Ray	Fernyhough, Rt Hon E.	Jeger, Mrs Lena
Carter-Jones, Lewis	Fitch, Alan (Wigan)	Jenkins, Hugh (Wandsworth)
Cartwright, John	Fitt, Gerard (Belfast)	Jenkins, Rt Hon Roy (B'ham St)
Castle, Rt Hon Barbara	Flannery, Martin	John, Brynmor
Clemitson, I. M.	Fletcher, Raymond (Ilkeston)	Johnson, James (Kingston W)
Cocks, Michael (Bristol S)	Fletcher, Ted (Darlington)	Johnson, W. H. (Derby S)
Cohen, Stanley	Foot, Rt Hon Michael	Jones, Barry (East Flint)
Coleman, Donald	Ford, Ben T.	Jones, Dan (Burnley)
Colquhoun, Mrs Maureen	Forrester, John	Jones, Alec (Rhondda)
Conlan, Bernard	Fowler, Gerald (The Wrekin)	Judd, Frank
Cook, Robin F. (Edin. C.)	Fraser, John (Lambeth N)	Kaufman, Gerald
Corbett, Robin	Freeson, Reginald	Kelley, Richard
Kerr, Russell	Noble, Mike	Spriggs, Leslie
Kilroy-Silk, Rober	Oakes, Gordon	Stallard, A. W.
Kinnock, Neil	Ogden, Eric	Stoddart, David
Lambie, David	O'Halloran, Michael	Stonehouse, Rt Hn John
Lamborn, Harry	O'Malley, Brian	Stott, Roger
Lamond, James	Orbach, Maurice	Strang, Gavin
Latham, Arthur (Paddington)	Ovenden, J.	Strauss, Rt Hon G. R.
Leadbitter, Ted	Owen, Dr David	Summerskill, Hon Dr Shirley
Lee, John	Padley, Walter	Swain, Thomas
Lestor, Miss J. (Eton & Slough)	Palmer, Arthur	Taylor, Mrs Ann (Bolton W)
Lever, Rt Hn Harold	Park, G.	Thomas, Dafydd (Merioneth)
Lewis, Arthur (Newham N.)	Parker, John	Thomas, Jeffrey (Abertillery)
Lewis, Ron (Carlisle)	Parry, Robert	Thomas, Mike (Newcastle)
Lipton, Marcus	Pearl, Rt Hon Fred	Thomas, Ron (Bristol NW)
Litterick, Tom	Pendry, Tom	Thorne, S. G. (Preston)
Lomas, Kenneth	Perry, Ernest	Tierney, Sydney
Loyden, Eddie	Phipps, Dr C.	Tinn, James
Luard, Evan	Prentice, Rt Hon Reg	Tomlinson, J.
Lyons, Edward (Bradford W.)	Prescott, John	Tomney, Frank
McCartney, Hugh	Price, C. (Lewisham W.)	Torney, Tom
McElhone, Frank	Price, William (Rugby)	Tuck, Raphael
McGuire, Michael (Ince)	Radice, Giles	Urwin, T. W.
Mackenzie, Gregor	Rees, Rt Hon Merlyn (Leeds S)	Varley, Rt Hon Eric G.
Mackintosh, John P.	Richardson, Miss Jo	Wainwright, Edwin (Dearne V)
Maclennan, Robert	Roberts, Albert (Normanton)	Walden, Brian (B'ham, L'dyw'd)
McMillan, Tom (Glasgow C.)	Roberts, Gwilym (Cannock)	Walker, Harold (Doncaster)
McNamara, Kevin	Robertson, John (Paisley)	Walker, Terry (Kingswood)
Madden, Max	Roderick, Caerwyn	Ward, Michael
Magee, Bryan	Rodgers, George (Chorley)	Watkins, David
Mahon, Simon	Rodgers, William (Teesside)	Watkinson, John
Mallalieu, J. P. W.	Rooker, J. W.	Weetch, Ken
Marquand, David	Roper, John	Weitzman, David
Marshall, Dr Edmund (Goole)	Rose, Paul B.	White, Frank R. (Bury)
Marshall, Jim (Leicester S)	Ross, Rt Hon W. (Kilm'nock)	White, James (Glasgow P)
Mason, Rt Hon Roy	Rowlands, Ted	Whitehead, Phillip
Maynard, Miss Joan	Ryman, John	Whitlock, William
Meacher, Michael	Sandelson, Neville	Wigley, Dafydd (Caernarvon)
Mellish, Rt Hon Robert	Sedgemore, B.	Willey, Rt Hon Frederick
Mendelson, John	Selby, Harry	Williams, Alan (Swansea)
Mikardo, Ian	Shaw, Arnold (Redbridge, Ilf)	Williams, A. L. (Havering)
Millan, Bruce	Sheldon, R. (Ashton-u-Lyne)	Williams, Rt Hn Mrs S. (Hertford)
Miller, Dr M. (E. Kilbride)	Shore, Rt Hon Peter	Williams, W. T. (Warrington)
Miller, Mrs Millie (Redbridge)	Short, Rt Hon E. (Newcastle C)	Wilson, Alexander (Hamilton)
Mitchell, R. C. (Soton, Itchen)	Short, Mrs R. (Wolv NE)	Wilson, Rt Hon H. (Huyton)
Molloy, William	Silkin, Rt Hn John (Lewish)	Wilson, William (Coventry SE)
Moonman, Eric	Silkin, Rt Hn S. C. (Southwk)	Wise, Mrs. Audrey
Morris, Alfred (Wythenshawe)	Sillars, James	Woodall, A.
Morris, Charles R. (Openshaw)	Silverman, Julius	Woof, Robert
Morris, Rt Hon J. (Aberavon)	Skinner, Dennis	Wrigglesworth, Ian
Moyle, Roland	Small, William	Young, David (Bolton E)
Mulley, Rt Hon Frederick	Smith, John (N Lanarkshire)
Murray, Ronald King	Snape, Peter	TELLERS FOR THE AYES:
Newens, S.	Spearing, Nigel	Mr. John Ellis and
		Mr. Joseph Harper.
NOES
Adley, Robert	Buck, Antony	Douglas-Hamilton, Lord James
Aitken, J. W. P.	Budgen, N. W.	Drayson, Burnaby
Alison, Michael	Bulmer, J. E.	du Cann, Rt Hon Edward
Amery, Rt Hn Julian	Burden, F. A.	Dunlop, J.
Arnold, Tom	Carlisle, Mark	Durant, Tony
Atkins, Rt Hn H. (Spelthorne)	Carr, Rt Hon Robert	Eden, Rt Hon Sir John
Awdry, Daniel	Carson, John	Edwards, Nicholas (Pembroke)
Bain, Mrs Margaret	Chalker, Mrs Lynda	Elliott, Sir William
Baker, Kenneth	Churchill, W. S.	Emery, Peter
Banks, R. G.	Clark, Alan (Plymouth S)	Ewing, Mrs Winifred (Moray)
Bell, Ronald	Clark, William (Croydon S)	Eyre, Reginald
Bennett, Sir Frederic (Torbay)	Clarke, Kenneth (Rushcliffe)	Fairbairn, N.
Bennett. Dr Reginald (Fareham)	Clegg, Walter	Fairgrieve, Russell
Berry, Hon. Anthony	Cockcroft, J. H.	Fell, Anthony
Biffen, John	Cope, J. A.	Finsberg, Geoffrey
Biggs-Davison, John	Cordle, John	Fisher, Sir Nigel
Blaker, Peter	Cormack, Patrick	Fletcher, Alex (Edinburgh N)
Body, Richard	Corrie, John	Fletcher-Cooke, Charles
Boscawen, Hon Robert	Costain, A. P.	Fookes, Miss Janet
Bowden, Andrew (Brighton)	Craig, Rt Hon W. (Belfast)	Fowler, Norman (Sutton C)
Boyson, Dr Rhodes (Brent)	Crawford, Dougas	Fox, Marcus
Braine, Sir Bernard	Critchley, Julian	Fraser, Rt Hon H. (Stafford & St)
Brittan. L.	Crouch, David	Freud, Clement
Brotherton, Michael	Crowder, F. P.	Fry, Peter
Brown, Sir Edward (Bath)	Davies, Rt Hon J. (Knutsford)	Galbraith, Hon T. G. D.
Bryan, Sir Paul	Dean, Paul (N Somerset)	Gardiner, George (Relgate)
Buchanan-Smith, Alick	Dodsworth, G. H.	Gardner, Edward (S Fylde)

Gilmour Rt Hon Ian (Chesham)	Lloyd, Ian (Havant)	Rippon, Rt Hon Geoffrey
Gilmour. Sir John (East File)	Loveridge, John	Roberts, Michael (Cardiff NW)
Glyn, Dr Alan	Luce, Richard	Roberts, Wyn (Conway)
Godber, Rt Hon J.	McAdden, Sir Stephen	Rodgers, Sir John (Sevenoaks)
Goodhew, Victor	MacCormick, Iain	Ross, Stephen (Isle of Wight)
Goodlad, A.	McCrindle, Robert	Ross, William (Londonderry)
Gorst, John	McCusker, Harold	Rossi Hugh (Hornsey)
Gow, I. (Eastbourne)	Macfarlane, Neil	Rost, Peter (S.E. Derbyshire)
Gower, Sir Raymond (Barry)	MacGregor, John	Royle, Sir Anthony
Grant, Anthony (Harrow C.)	Macmillan, Rt Hn M. (Farnham)	Sainsbury, Tim
Gray, Hamish	McNair-Wilson, M. (Newbury)	St. John-Stevas, Norman
Grieve, Percy	McNair-Wilson, P. (New Forest)	Shaw, Giles (Pudsey)
Griffiths, Eldon	Madel, David	Shelton, William (Lambeth, St)
Grimond, Rt Hon J.	Marshall, Michael (Arundel)	Shepherd, Colin
Grist, Ian	Marten, Neil	Shersby, Michael
Grylis, Michael	Mates, Michael	Silvester, F.
Hall, Sir John	Mather, Carol	Sims, Roger
Hall-Davis, A. G. F.	Maude, Angus	Sinclair, Sir George
Hamilton, Michael (Salisbury)	Mawby, Ray	Skeet, T. H. H.
Hampson, Dr. Keith	Maxwell-Hyslop, Robin	Smith, Cyril (Rochdale)
Hannam, John	Mayhew, Patrick	Smith, Dudley (Warwick)
Harrison, Sir Harwood (Eye)	Meyer, Sir Anthony	Speed, Keith
Harvie Anderson, Rt Hn Miss	Miller, Hal (Bromsgrove)	Spence, John
Hastings, Stephen	Mills, Peter	Spicer, James (W Dorset)
Havers, Sir Michael	Miscampbell, Norman	Spicer, Michael (S Worcester)
Hayhoe, Barney	Mitchell, David (Basingstoke)	Stainton Keith
Heath, Rt Hon Edward	Moate, Roger	Stanbrook, Ivor
Henderson, Douglas	Molyneaux, James	Stanley, John
Heseltine, Michael	Monro, Hector	Steel, David (Roxburgh)
Hicks, Robert	Montgomery, Fergus	Steen, Anthony (Liverpool)
Higgins, Terence L.	Moore, John (Croydon C.)	Stewart, Donald (Western Isles)
Holland, Philip	More, Jasper (Ludlow)	Stewart, Ian (Hitchin)
Hooson, Emlyn	Morgan, Geraint	Stokes, John
Hordern, Peter	Morris, Michael (Northants)	Tapsell, Peter
Howe, Rt Hon Sir Geoffrey	Morrison, Charles (Devizes)	Taylor, R. (Croydon N.W.)
Howell, David (Guildford)	Morrison, Peter (Chester)	Taylor, Teddy (Glasgow, C)
Howells, Geraint (Cardigan)	Mudd, David	Tebbit, Norman
Hunt, John	Neave, Airey	Temple-Morris, P.
Hurd, D.	Nelson, Anthony	Thatcher, Rt Hon M.
Hutchison, Michael Clark	Neubert, M.	Thomas, Rt Hon P. (Barnet)
Irvine, Bryant Godman (Rye)	Newton, A.	Thompson, George
Irving, Charles (Cheltenham)	Onslow, Cranley	Thorpe, Rt Hon Jeremy (Devon)
James, David	Oppenheim, Mrs Sally	Townsend, Cyril D.
Jenkin, Rt Hon Patrick (Redbr)	Osborn, John	Trotter, Neville
Jessel, Toby	Page, Rt Hon R. Graham (Crosby)	Tugendhat, Christopher
Johnson Smith, G.(E Grinstead)	Page, John (Harrow West)	van Straubenzee, W. R.
Jones, Arthur (Daventry)	Pardoe, John	Vaughan, Dr Gerard
Jopling, Michael	Parkinson, Cecil	Viggers, P. J.
Joseph, Rt Hon Sir Keith	Pattie, Geoffrey	Wainwright, R. (Colne Valley)
Kaberry, Sir Donald	Penhaligon, David	Wakeham, John
Kellett-Bowman, Mrs. Elaine	Percival, Ian	Walder David (Clitheroe)
Kershaw, Anthony	Peyton, Rt Hon John	Walker Rt Hon P. (Worcester)
Kilfedder, James	Pink, R. Bonner	Walters, Dennis
Kimball, Marcus	Powell, Rt Hon J. Enoch	Warren, Kenneth
King, Evelyn (South Dorset)	Price, David (Eastleigh)	Watt, Hamish
King, Tom (Bridgwater)	Prior, Rt Hon James	Weatherill, Bernard
Kitson, Sir Timothy	Pym, Rt Hon Francis	Wells, John
Knight, Mrs Jill	Raison, Timothy	Welsh, Andrew
Knox, David	Rathbone, T.	Whitelaw, Rt Hon William
Lamont, Norman	Rawlinson, Rt Hon Sir Peter	Wilson, Gordon (Dundee E)
Lane, David	Rees, Peter (Dover & Deal)	Winterton, Nicholas
Langford-Holt, Sir John	Rees-Davies, W. R.	Wood, Rt Hon Richard
Latham, Michael (Melton)	Renton, Rt Hn Sir D. (Hunts)	Young, Sir George (Ealing)
Lawrence I.	Renton, Tim (Mid-Sussex)
Lawson, Nigel	Ridley, Hon Nicholas	TELLERS FOR THE NOES:
Le Marchant, Spencer	Ridsdale, Julian	Mr. Adam Butler and
Lester, Jim (Beeston)	Rifkind, Malcolm	Mr. John Stradling Thomas.
Lewis, Kenneth (Rutland)

Question accordingly agreed to.

9. BUILDING SOCIETIES

Motion made, and Question, That provision may be made with respect to certain sums payable by building societies. —[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

10. LIFE POLICIES, LIFE ANNUITY CON TRACTS AND CAPITAL REDEMPTION POLICIES (INCOME TAX)

Motion made, and Question, That charges to income tax may be imposed by provisions about—

1. (a) the surrender of rights under life policies, contracts for life annuities or capital redemption policies;
2. (b) the exercise of options conferred by such policies or contracts;
731
3. (c) the conversion of such policies into paid-up or partly paid-up policies; or
4. (d) matters treated under the provisions as matters equivalent to the surrender of such rights or to the exercise of such options;

and those provisions may extend to events happening at any time after 26th March 1974.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

11. EXTENDED TAX EXEMPTION FOR SAVINGS CERTIFICATES (INCOME TAX)

Motion made, and Question, That provision may be made for extending the exemption relating to United Kingdom and Ulster savings certificates conferred by sections 95(1) and 96(1) of the Income and Corporation Taxes Act 1970.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

12. TRANSACTIONS BETWEEN ASSOCIATED PERSONS (INCOME TAX AND CORPORATION TAX)

Motion made, and Question, That charges to income tax and corporation tax (including charges for the year 1974–75 or for past accounting periods) may be imposed by further provisions about sales or other transactions at an undervalue or overvalue, and any Act of the present Session giving effect to this Resolution may contain provisions incidental or supplementary to the preceding provisions of this Resolution, including provisions about the obtaining of information.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to

13. INITIAL ALLOWANCES FOR INDUSTRIAL BUILDINGS AND STRUCTURES, ETC. (INCOME TAX AND CORPORATION TAX)

Motion made, and Question, That provision may be made for increasing the amount of initial allowances under Chapter I of Part I of the Capital Allowances Act 1968 in relation to expenditure incurred after 12th November 1974.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

14. ALLOWANCES FOR EXPENDITURE ON THERMAL INSULATION (INCOME TAX AND CORPORATION TAX)

Motion made, and Question, That provision may be made for the making of allowances under Chapter I of Part III of the Finance Act 1971 in respect of expenditure incurred in adding to any industrial building or structure (as defined in section 7 of the Capital Allowances Act 1968) any insulation against loss of heat.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

15. TRADE UNIONS (INCOME TAX AND CORPORATION TAX)

Motion made, and Question put forthwith pursuant to Standing Order No. 94 (Ways and Means motions):— That provision may be made for treating certain trade unions as having been registered trade unions within the meaning of section 338 of the Income and Corporation Taxes Act 1970 (exemption from tax of income and chargeable gains applicable and applied for the purpose of provident benefits). —[Mr. Healey]

The House divided: Ayes 306, Noes 268.

Division No. 9.]	AYES	[10.28 p.m.
Abse, Leo	Bray, Dr Jeremy	Conlan, Bernard
Allaun, Frank	Broughton, Sir Alfred	Cook, Robin F. (Edin. C.)
Anderson, Donald	Brown, Hugh D. (Glasgow, Pr)	Corbett, Robin
Archer, Peter	Brown, Robert C. (Newcastle)	Craigen, J. M. (Glasgow, M)
Armstrong, Ernest	Brown, Ronald (Hackney S)	Crawshaw, Richard
Ashley, Jack	Buchan, Norman	Cronin, John
Ashton, Joe	Buchanan, Richard	Crosland, Rt Hon Anthony
Atkins, Ronald (Preston N.)	Butler, Mrs Joyce (Haringey)	Cryer, G. R.
Atkinson, Norman	Callaghan, Rt Hon J. (Cardiff S)	Cunningham, G. (Islington S)
Bagier, Gordon A. T.	Callaghan, Jim (Middleton & P)	Cunningham, Dr J. (Whiteh)
Barnett, Joel (Heywood)	Campbell, Ian	Dalyell, Tam
Bates Alf	Canavan, Dennis	Davidson, Arthur
Bean, Robert E.	Cant, R. B.	Davies, Bryan (Enfield N)
Benn, Rt Hn Anthony Wedgwood	Carmichael, Neil	Davies, Denzil (Llanelli)
Bennett, A. (Stockport North)	Carter, Ray	Davies, Ifor (Gower)
Bidwell, Sydney	Carter-Jones, Lewis	Davis, S. Clinton (Hackney C)
Bishop, Edward	Cartwright, John	Deakins, Eric
Blenkinsop, Arthur	Castle, Rt Hon Barbara	Dean, Joseph (Leeds West)
Boardman, H.	Clemitson, I. M.	Delargy, Hugh
Booth, Albert	Cocks, Michael (Bristol S)	Dell, Rt Hon Edmund
Bottomley, Rt Hon Arthur	Cohen, Stanley	Dempsey, James
Boyden, James (Bish Auck)	Coleman, Donald	Doig, Peter
Bradley, Tom	Colquhoun, Mrs Maureen	Dormand, Jack
Douglas-Mann, Bruce	Kerr, Russell	Roderick, Caerwyn
Duffy, A. E. P.	Kilroy-Silk, Robert	Rodgers, George (Chorley)
Dunn, James A.	Kinnock, Neil	Rodgers, William (Teesside)
Dunnett, Jack	Lambie, David	Rooker, J. W.
Dunwoody, Mrs G. P.	Lamborn, Harry	Roper, John
Eadie, Alex	Lamond, James	Rose, Paul B.
Edelman, Maurice	Latham, Arthur (Paddington)	Ross, Rt Hon W. (Kilm'nock)
Edge, Geoffrey	Leadbitter, Ted	Rowlands, Ted
Edwards, Robert (Wolv SE)	Lee, John	Ryman, John
Ellis, Tom (Wrexham)	Lestor, Miss J. (Eton & Slough)	Sandelson, Neville
Ennals, David	Lever, Rt Hn Harold	Sedgemore, B.
Evans, Fred (Caerphilly)	Lewis, Arthur (Newham N.)	Selby, Harry
Evans, Gwynfor (Carmarthen)	Lewis, Ron (Carlisle)	Shaw, Arnold (Redbridge, Ilf)
Evans, Ioan L. (Aberdare)	Lipton, Marcus	Sheldon, R. (Ashton-u-Lyne)
Evans, John (Newton)	Litterick, Tom	Shore, Rt Hon Peter
Ewing, Harry (Stirling)	Lomas, Kenneth	Short, Rt Hon E. (Newcastle C)
Faulds, Andrew	Loyden, Eddie	Short, Mrs R. (Wolv NE)
Fernyhough, Rt Hon E.	Luard, Evan	Silkin, Rt Hn S. C. (Southwk)
Fitch, Alan (Wigan)	Lyons, Edward (Bradford W.)	Silkin, Rt Hn John (Lewish)
Fitt, Gerard (Belfast)	McCartney, Hugh	Sillars, James
Flannery, Martin	McElhone, Frank	Silverman, Julius
Fletcher, Raymond (Ilkeston)	McGuire, Michael (Ince)	Skinner, Dennis
Fletcher, Ted (Darlington)	Mackenzie, Gregor	Small, William
Foot, Rt Hon Michael	Mackintosh, John P.	Smith, John (N Lanarkshire)
Ford, Ben T.	Maclennan, Robert	Snape, Peter
Forrester, John	McMillan, Tom (Glasgow C.)	Spearing, Nigel
Fowler, Gerald (The Wrekin)	McNamara, Kevin	Spriggs, Leslie
Fraser, John (Lambeth N)	Madden, Max	Stallard, A. W.
Freeson, Reginald	Magee, Bryan	Stoddart, David
Garrett, John (Norwich S)	Mahon, Simon	Storehouse, Rt Hn John
Garrett, W. (Wallsend)	Malialieu, J. P. W.	Stott, Roger
George, Bruce	Marquand, David	Strang, Gavin
Gilbert, Dr John	Marshall, Dr Edmund (Goole)	Strauss, Rt Hon G. R.
Ginsburg, David	Marshall, Jim (Leicester S)	Summerskill, Hon Dr Shirley
Golding, John	Mason, Rt Hon Roy	Swain, Thomas
Gould, Bryan	Maynard, Miss Joan	Taylor, Mrs Ann (Bolton W)
Gourlay, Harry	Meacher, Michael	Thomas, Dafydd (Merioneth)
Graham, Ted	Mellish, Rt Hon Robert	Thomas, Jeffrey (Abertillery)
Grant, George (Morpeth)	Mendelson, John	Thomas, Mike (Newcastle)
Grant, John (Islington C.)	Mikardo, Ian	Thomas, Ron (Bristol NW)
Grocott, Bruce	Millan, Bruce	Thorne, S. G. (Preston)
Hamilton, James (Bothwell)	Miller, Dr M. (E. Kilbride)	Tierney, Sydney
Hamilton, w. W. (Central Fife)	Miller, Mrs Millie (Redbridge)	Tinn, James
Hamling, William	Mitchell, R. C. (Soton, Itchen)	Tomlinson, J.
Hardy, Peter	Molloy, William	Tomney, Frank
Harper, Joseph	Moonman, Eric	Torney, Tom
Harrison, Walter (Wakefield)	Morris, Alfred (Wythenshawe)	Tuck, Raphael
Hart, Rt Hon Judith	Morris, Charles R. (Openshaw)	Urwin, T. W.
Hattersley, Roy	Morris, Rt Hon J. (Aberavon)	Varley, Rt Hon Eric G.
Hatton, Frank	Moyle, Roland	Wainwright, Edwin (Dearne V)
Hayman, Mrs Helene	Mulley, Rt Hon Frederick	Walden, Brian (B'ham, L'dyw'd)
Healey, Rt Hon Denis	Murray, Ronald King	Walker, Harold (Doncaster)
Heffer, Eric S.	Newens, S.	Walker, Terry (Kingswood)
Hooley, Frank	Noble, Mike	Ward, Michael
Horam, John	Oakes, Gordon	Watkins, David
Hoyle, Douglas (Nelson)	Ogden, Eric	Watkinson, John
Huckfleld, Leslie	O'Halloran, Michael	Weetch, Ken
Hughes, Rt Hon C. (Anglesey)	O'Malley, Brian	Weitzman, David
Hughes, Mark (Durham)	Orbach, Maurice	White, Frank R. (Bury)
Hughes, Robert (Aberdeen N)	Ovenden, J.	White, James (Glasgow P)
Hughes, Roy (Newport)	Owen, Dr David	Whitehead, Phillip
Hunter, Adam	Padley, Walter	Whitlock, William
Irvine, Rt. Hon Sir A. (L'pool)	Palmer, Arthur	Wigley, Dafydd (Caernarvon)
Irving, Rt Hon S. (Dartford)	Park, G.	Willey, Rt Hon Frederick
Jackson, Colin (Brighouse)	Parker, John	Williams, Alan (Swansea)
Jackson, Miss Margaret (Lincoln)	Parry, Robert	Williams, Alan Lee (Havering)
Janner, Greville	Peart, Rt Hon Fred	Williams, Rt Hn Mrs S. (Hertford)
Jay, Rt Hon Douglas	Pendry, Tom	Williams, W. T. (Warrington)
Jeger, Mrs Lena	Perry, Ernest	Wilson, Alexander (Hamilton)
Jenkins, Hugh (Wandsworth)	Phipps, Dr C.	Wilson, Rt Hon H. (Huyton)
Jenkins, Rt Hon Roy (B'ham St)	Prentice, Rt Hon Reg	Wilson, William (Coventry SE)
John, Brynmor	Prescott, John	Wise, Mrs. Audrey
Johnson, James (Kingston W)	Price, C. (Lewisham W.)	Woodall, A.
Johnson, W. H. (Derby S)	Price, William (Rugby)	Woof, Robert
Jones, Barry (East Flint)	Radice, Giles	Wrigglesworth, Ian
Jones, Dan (Burnley)	Rees, Rt Hon Merlyn (Leeds S)	Young, David (Bolton E)
Jones, Alec (Rhondda)	Richardson, Miss Jo
Judd, Frank	Roberts, Albert (Normanton)	TELLERS FOR THE AYES:
Kaufman, Gerald	Roberts, Gwilym (Cannock)	Mr. Thomas Cox and
Kelley, Richard	Robertson, John (Paisley)	Mr. John Ellis

NOES
Adley, Robert	Gorst, John	Mills, Peter
Aitken, J. W. P.	Gow, I. (Eastbourne)	Miscampbell, Norman
Alison, Michael	Gower, Sir Raymond (Barry)	Mitchell, David (Basingstoke)
Amery, Rt Hn Julian	Grant, Anthony (Harrow C.)	Moate, Roger
Arnold, Tom	Gray, Hamish	Molyneaux, James
Atkins, Rt Hn H. (Spelthorne)	Grieve, Percy	Monro, Hector
Awdry, Daniel	Griffiths, Eldon	Moore, John (Croydon C.)
Bain, Mrs Margaret	Grimond, Rt Hon J.	More, Jasper (Ludlow)
Baker, Kenneth	Grist, Ian	Morgan, Geraint
Banks, R. G.	Grylls, Michael	Morris, Michael (Northants)
Bell Ronald	Hall, Sir John	Morrison, Charles (Devizes)
Bennett, Sir Frederic (Torbay)	Hall-Davis, A. G. F.	Morrison, Peter (Chester)
Bennett, Dr Reginald (Fareham)	Hamilton, Michael (Salisbury)	Mudd, David
Berry, Hon. Anthony	Hampson, Dr. Keith	Neave, Airey
Biffen, John	Hannam, John	Nelson, Anthony
Biggs-Davison, John	Harrison, Sir Harwood (Eye)	Neubert, M.
Blaker, Peter	Harvie Anderson, Rt Hn Miss	Newton, A.
Body, Richard	Hastings, Stephen	Onslow, Cranley
Boscawen, Hon Robert	Havers, Sir Michael	Oppenheim, Mrs Sally
Bowden, Andrew (Brighton)	Hayhoe, Barney	Osborn, John
Boyson, Dr Rhodes (Brent)	Heath, Rt Hon Edward	Page, John (Harrow West)
Braine, Sir Bernard	Henderson, Douglas	Page, Rt Hon R. Graham (Crosby)
Brittan, L.	Heseltine, Michael	Pardoe, John
Brotherton, Michael	Hicks, Robert	Parkinson, Cecil
Brown, Sir Edward (Bath)	Higgins, Terence L.	Pattie, Geoffrey
Bryan, Sir Paul	Holland, Philip	Percival, Ian
Buchanan-Smith, Alick	Hooson, Emlyn	Peyton, Rt Hon John
Buck, Antony	Hordern, Peter	Pink, R. Bonner
Budgen, N. W.	Howe, Rt Hon Sir Geoffrey	Price, David (Eastleigh)
Bulmer, J. E.	Howell, David (Guildford)	Prior, Rt Hon James
Burden, F. A.	Howells, Geraint (Cardigan)	Pym, Rt Hon Francis
Carlisle, Mark	Hunt, John	Raison, Timothy
Carr, Rt Hon Robert	Hurd, D.	Rathbone, T.
Chalker. Mrs Lynda	Hutchison, Michael Clark	Rawlinson, Rt Hon Sir Peter
Churchill, W. S.	Irvine, Bryant Godman (Rye)	Rees, Peter (Dover & Deal)
Clark, Alan (Plymouth S)	Irving, Charles (Cheltenham)	Rees-Davies, W. R.
Clark, William (Croydon S)	James, David	Renton, Rt Hn Sir D. (Hunts)
Clarke, Kenneth (Rushcliffe)	Jenkin, Rt Hon Patrick (Redbr)	Renton, Tim (Mid-Sussex)
Clegg, Walter	Jessel, Toby	Ridley, Hon Nicholas
Cockcrott, J. H.	Johnson Smith, G. (E Grinstead)	Ridsdale, Julian
Cope, J. A.	Jones, Arthur (Daventry)	Rifkind, Malcolm
Cordle, John	Jopling, Michael	Rippon, Rt Hon Geoffrey
Cormack, Patrick	Joseph, Rt Hon Sir Keith	Roberts, Michael (Cardiff NW)
Corrie, John	Kaberry, Sir Donald	Roberts, Wyn (Conway)
Costain, A. P.	Kellett-Bowman, Mrs. Elaine	Rodgers, Sir John (Sevenoaks)
Crawford, Douglas	Kershaw, Anthony	Rossi Hugh (Hornsey)
Critchley, Julian	Kimball, Marcus	Rost, Peter (S.E. Derbyshire)
Crouch, David	King, Evelyn (South Dorset)	Royle, Sir Anthony
Crowder, F. P.	King, Tom (Bridgwater)	Sainsbury, Tim
Davies, Rt Hon J. (Knutsford)	Kitson, Sir Timothy	St. John-Stevas, Norman
Dean, Paul (N Somerset)	Knight, Mrs Jill	Shaw, Giles (Pudsey)
Dodsworth, G. H.	Knox, David	Shelton, William (Lambeth, St)
Douglas-Hamilton, Lord James	Lamont, Norman	Shepherd, Colin
Drayson, Burnaby	Lane, David	Shersby, Michael
du Cann, Rt Hon Edward	Langford-Holt, Sir John	Silvester, F.
Durant, Tony	Latham, Michael (Melton)	Sims, Roger
Eden, Rt Hon Sir John	Lawrence, I.	Sinclair, Sir George
Edwards, Nicholas (Pembroke)	Lawson, Nigel	Skeet, T. H. H.
Elliott, Sir William	Le Marchant, Spencer	Smith, Dudley (Warwick)
Emery, Peter	Lester, Jim (Beeston)	Speed, Keith
Ewing, Mrs Winifred (Moray)	Lewis, Kenneth (Rutland)	Spence, John
Eyre, Reginald	Lloyd, Ian (Havant)	Spicer, James (W Dorset)
Fairbairn, Nicholas	Loveridge, John	Spicer, Michael (S Worcester)
Fairgrieve, Russell	Luce, Richard	Stainton Keith
Fell, Anthony	McAdden, Sir Stephen	Stanbrook, Ivor
Finsberg, Geoffrey	MacCormick, Iain	Stanley, John
Fisher, Sir Nigel	McCrindle, Robert	Steel, David (Roxburgh)
Fletcher, Alex (Edinburgh N)	Macfarlane, Neil	Steen, Anthony (Liverpool)
Fletcher-Cooke, Charles	MacGregor, John	Stowart, Donald (Western Isles)
Fookes, Miss Janet	Macmillan, Rt Hn M. (Farnham)	Stewart, Ian (Hitchin)
Fowler, Norman (Sutton C)	McNair-Wilson, M. (Newbury)	Stokes, John
Fox, Marcus	McNair-Wilson, P. (New Forest)	Tapsell, Peter
Fraser, Rt Hon H. (Stafford & St)	Madel, David	Taylor, R. (Croydon N.W.)
Freud, Clement	Marshall, Michael (Arundel)	Taylor, Teddy (Glasgow, C)
Fry, Peter	Marten, Neil	Tebbit, Norman
Galbraith, Hon T. G. D.	Mates, Michael	Temple-Morris, P.
Gardiner, George (Reigate)	Mather, Carol	Thatcher, Rt Hon M.
Gardner, Edward (S Fylde)	Mates, Angus	Thomas, Rt Hon P. (Barnet)
Gilmour, Rt Hon Ian (Chesham)	Mawby, Ray	Thompson, G.
Gilmour, Sir John (East Fife)	Maxwell-Hyslop, Robin	Thorpe, Rt Hon Jeremy (Devon)
Glyn, Dr Alan	Mayhew, Patrick	Townsend, Cyril D.
Godber, Rt Hon J.	Meyer, Sir Anthony	Trotter, Neville
Goodhew, Victor	Miller, Hal (Bromsgrove)	Tugendhat, Christopher
Goodlad, Alastair

van Straubenzee, W. R.	Warren, Kenneth	Winterton, Nicholas
Vaughan, Dr Gerard	Watt, Hamish	Wood, Rt Hon Richard
Viggers, P. J.	Weatherill, Bernard	Young, Sir George (Ealing)
Wainwright, R. (Colne Valley)	Wells, John
Wakeham, John	Welsh, Andrew	TELLERS FOR THE NOES
Walder David (Clitheroe)	Whitelaw, Rt Hon William	Mr. Adam Butler and
Walker Rt Hon P. (Worcester)	Wilson, Gordon (Dundee E)	Mr. John Stradling Thoma
Walters, Dennis

Question accordingly agree to.

16. RELIEF FOR APPRECIATION IN VALUE

OF STOCK (CORPORATION TAX)

Motion made, and Question, That, in the case of companies carrying on a trade, it is expedient in certain cases to make provision for relief from corporation tax by reference to the valuation of their trading stock at the end of accounting periods ending within or comprising the financial year 1973; and that any Act making provision for such relief may contain provisions incidental or supplementary to the preceding provisions of this Resolution, including provisions with respect to past accounting periods.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

17. SIGNATURE OF CERTAIN REQUISITIONS AND REQUESTS OF THE TREASURY

Motion made, and Question, That further provision be made as to the signature of requisitions and requests for credits under section 13 or 15 of the Exchequer and Audit Departments Act 1866 or section 1(3) of the National Loans Act 1968.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

18. APPOINTMENT OF GENERAL COMMISSIONERS IN SCOTLAND AND FORM OF DECLARATION BY CERTAIN OFFICERS

Motion made, and Question, That it is expedient to amend the Taxes Management Act 1970 with respect to the appointment of General Commissioners for divisions in Scotland and the declaration to be made by General and Special Commissioners and certain other officers.ߞ[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

19. VEHICLES EXCISE DUTY (NORTHERN IRELAND)

6.Motion made, and Question, That there may be made in the Vehicles (Excise) Act (Northern Ireland) of 1972 (1972 c. 10 of Northern Ireland) amendments (with retrospective effect) corresponding to amend- ments made for Great Britain by section 50 of the Finance Act 1974 (extension of exemption of disabled persons from vehicles excise duty) and for correcting the short title.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

PROCEDURE (FUTURE TAXATION)

Motion made, and Question, That, notwithstanding anything to the contrary in the practice of the House relating to the matters which may be included in Finance Bills, any Finance Bill of the present Session may contain provisions taking effect in a future year with respect to relief under section 19 or 20 of the Income and Corporation Taxes Act 1970.ߞ[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

PROCEDURE (LOANS BY PUBLIC WORKS LOAN COMMISSIONERS)

Motion made, and Question, That, notwithstanding anything to the contrary in the practice of the House relating to the matters which may be included in Finance Bills, any Finance Bill of the present Session may contain provision for enabling the Public Works Loan Commissioners to make further loans in pursuance of section 3 of the National Loans Act 1968.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

FINANCE [MONEY]

Queen's Recommendation having been signified—

Motion made, and Question, That, for the purposes of any Act of the present Session relating to finance, it is expedient to authorize— (a) any increase in the sums to be issued out of or paid into the National Loans Fund which is attributable to any provision of that Act enabling the Public Works Loan Commissioners to make further loans in pursuance of section 3 of the National Loans Act 1968 up to a limit of £8,000 million; and (b) any increase attributable to any provision of the said Act of the present Session in the sums payable out of moneys provided by Parliament under the Consular Relations Act 1968 or the International Organisations Act 1968.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

Bill ordered to be brought in upon the Resolutions relating to Ways and Means and Finance [Money] and the orders relating to Procedure made this day; to be brought in by the Chairman of Ways and Means, the Chancellor of the Exchequer, Mr. Harold Lever, Mr. Edmund Dell, Mr. Joel Barnett, Mr. Robert Sheldon and Dr. John Gilbert.

FINANCE

Bill to grant certain duties, to alter other duties and to amend the law relating to the National Debt and the Public Revenue, and to make further provision in connection with Finance, presented accordingly by Dr. John Gilbert and read the First time; to be read a Second time tomorrow and to be printed. [Bill 11.]

20. PETROLEUM REVENUE TAX

Motion made, and Question, That a tax shall be charged in respect of profits from substances won or capable of being won under the authority of licences granted under the Petroleum (Production) Act 1934 (including section 2 of that Act as applied by section 1(3) of the Continental Shelf Act 1964) or the Petroleum (Production) Act (Northern Ireland) 1964, including certain profits accruing before the passing of any Act imposing the tax, and that any such Act may include provisions incidental or supplementary to the preceding provisions of this Resolution.—[Mr. Healey.]

put forthwith pursuant to the Order of the House this day, and agreed to.

21. INCOME TAX AND CORPORATION TAX (AMENDMENTS CONNECTED WITH PETROLEUM AND PETROLEUM COMPANIES)

Motion made, and Question, That there shall be made in the law relating to income tax and corporation tax amendments connected with petroleum companies or with substances won or capable of being won under the authority of licences granted under the Petroleum (Production) Act 1934 (including section 2 of that Act as applied by section 1(3) of the Continental Shelf Act 1964) or the Petroleum (Production) Act (Northern Ireland) 1964, and that this Resolution shall authorise the imposition of charges to income tax or corporation tax arising out of those amendments, including charges for the year 1974–75 and for past accounting periods.—[Mr. Healey.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

Bill ordered to brought in upon the foregoing resolutions; to be brought in by the Chairman of Ways and Means, the Chancellor of the Exchequer, Mr. Eric G. Varley, Mr. Harold Lever, Mr. Edmund Dell, Mr. Joel Barnett, Mr. Robert Sheldon and Dr. John Gilbert.

OIL TAXATION

Bill to impose a new tax in respect of profits from substances won or capable of being won under the authority of licences granted under the Petroleum (Production) Act 1934 or the Petroleum (Production) Act (Northern Ireland) 1964; to make in the law relating to income tax and corporation tax amendments connected with such substances or with petroleum companies; and for connected purposes, presented accordingly by Dr. John Gilbert and read the First time; to be read a Second time tomorrow and to be printed. [Bill 12.]