Motion made, and Question proposed,
That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance: but:
§ 5.48 p.m.
§ Mrs. Margaret Thatcher (Finchley)
It is the privilege of the Leader of the Opposition to congratulate the Chancellor of the day on the manner and conduct of his delivery. It is a great strain for anyone to speak for two and a quarter hours. That is the time during which the Chancellor has been at us on his Budget. I note that while the Chancellor has been doing that, he has contributed to the revenue of the country. Indeed it is the strongest brew which I have seen a Chancellor take, and in view of the contents of the Budget, perhaps that is not surprising. He must be the last person to have taken a last sip at the old price.
I have read the speeches of some of those who have held this position. I noticed that the earliest time at which a previous Leader of the Opposition rose after a Budget speech was at four minutes past five o'clock. But those were in the good old Tory days when we actually reduced taxation in Budgets. In all my experience, I have never listened to a Budget which put so much additional tax on the British people at one go. It is a typical Socialist Budget: equal shares of misery for all.
We are in some difficulty knowing how to adjudge what the Chancellor of the Exchequer says. In his speech last year he made a very vigorous comment about the borrowing requirement. He said that he intended to be really tough and that he would reduce it to some £2,700 million. In fact, he intended just about to halve it. However, when he says that he intends to halve it, in practice he just about doubles it. After all the steps that he has taken this year, we now have a public sector borrowing requirement of some £9 billion. In other words, if we adjudge him by doubling everything that he says he will halve, it becomes extremely difficult to know what effect he will have. He seems to talk tough, but he delays some of his tough measures until next year, although he has put a fair share of tough measures on to this year.
324 It is clear to us all that the right hon. Gentleman has three main problems: public expenditure, inflation and borrowing. But the key to them is the first two. I take public expenditure first.
The right hon. Gentleman inherited from us some public expenditure reductions. He frittered those away deliberately by putting up public expenditure by 10 per cent. in real terms over this last year. That is the reason why he is in such difficulty now. His problems lie not in his predecessor's action but in his own. If he had not put up public expenditure as much, Britain would not have such a high rate of expenditure now and he would not have to take such severe steps to deal with it.
Most of the increases came in subsidies. I think that it is time that the Government said to the British people, "We shall give you a choice. We shall stop saying that you must pay additional tax because we have decided on additional public expenditure "That is what this Government are saying. Because they have put up public expenditure and because they cannot borrow any more money from capitalist countries without strings attached to it, they must put up the level of taxation.
There are many people who would prefer a lower level of taxation and a lower level of public expenditure. However, they have no choice in the matter. The Chancellor of the Exchequer is saying, in different words, what George Bernard Shaw once said, "Under Socialism, you will not get what you like, so you will have to like what you get". There will be no choice at all.
As for inflation, our record is much worse than that of other countries because they took steps to deal with it before. We did not. The Chancellor of the Exchequer has taken virtually no steps to deal with inflation and still has no strategy to deal with it. He is relying on a social contract which in almost every other sentence in his speech he pointed out was neither contractual nor social. It has borne very heavily on those who do not get the large increases in wages and salaries but who nevertheless will have to pay the increased prices and bear the increased burden.
When we come to borrowing, the Chancellor of the Exchequer has nearly run out of the good will of his overseas 325 lenders. The essence of his speech was, "They have seen me through up till now, but in future they will put strings on any substantial additional borrowings we make"
I come to some of the right hon. Gentleman's taxation measures. In the company sector, we agree about the need to get more investment. However, we are not likely to get more investment by small measures. It will come only by a change of attitude towards profitability and investment itself. We should have a programme of investing in success and saying to people, "If you invest, you will not only retain the value of your money but might get some interest from it." People would then invest. If we have a prices programme which stops companies from recouping all their costs and from getting a decent level of profitability, and if we have a dividend limitation programme well below the level of inflation, we shall not persuade people or institutions to invest if by doing so they take a certain way of losing money. There is money available to invest for a Government who believe in investment and who believe that the people who invest should have some reasonable return on their investment.
As for the right hon. Gentleman's stock appreciation measures, all that he has done is again to defer the tax to next year. He has not eliminated the tax burden on stock appreciations.
With regard to VAT, I believe that we had the best method in the world, having the single rate with the zero rate. There is no doubt that what the right hon. Gentleman proposes will represent a considerable additional burden on the shopkeeper and an additional administrative burden on Customs and Excise and will add to the costs of bureaucracy.
As for some of the right hon. Gentleman's other measures, one of the most severe is putting up income tax. Anyone shearing sheep stops when he comes to the skin. This is a lesson that the right hon. Gentleman has not yet learned. He is fleecing people practically down to the skin. I believe that people have virtually come to the end in terms of the additional taxation that they are prepared to yield to the Government. Although the right hon. Gentleman intends to keep down the rate support grant settlement, the rates may go up unless he has a better mechan- 326 ism of control on local government expenditure. He spoke of controlling programmes by their cost levels rather than by the policy level of programmes, and most of us would be glad to see that.
The tax reliefs announced by the Chancellor of the Exchequer do not take account of inflation to anything like the full extent. He has given reliefs of £50 on the single allowance and of £90 on the married allowance. In our view it should have been £117 on the single allowance and £163 on the married allowance to take inflation fully into account.
Naturally, my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) will be opening the Budget debate tomorrow on behalf of the Opposition. I hope that he will be a good deal more cheerful than the Chancellor of the Exchequer has been today. Someone has to have a little hope for the future—[Interruption.] The Foreign and Commonwealth Secretary is muttering away. I remember him making a Budget speech in which he summed up his Budget as, "Steady as she goes." The present Chancellor of the Exchequer seemed to be saying that this one was, "Steady as she sinks."
§ 5.58 p.m.
§ Mr. John Stokes (Halesowen and Stourbridge)
The Chancellor of the Exchequer has made his statement at a time when this once great country has about reached its lowest ebb. I doubt very much whether there will be a word about it in the foreign Press. We are indeed alone with our own troubles.
We have heard how the country is living beyond its means to the tune of 5 per cent., how inflation is running at more than 20 per cent., how wages are rising by 30 per cent. and how the Budget deficit has reached the colossal total of £9,000 million, while the pound is at an all-time low. Who could have foreseen such a state of affairs even a few years ago?
I do not blame all our troubles on the Chancellor. I acquit him in some measure for the moral decline in this country. However, the Chancellor has a great responsibility over many areas. First and foremost, he has not pushed back nearly enough the frontiers of Government spending and interference, and the 327 share which the Government take of the national wealth. The Government are still taking at least half of the national wealth in tax, although they are continuing to borrow and print money, thus stoking the fires of inflation. It was most noticeable in the Chancellor's speech that while certain taxes were to be increased in the near future, the cuts in Government expenditure—the nation's main requirement of the Chancellor—are vague, undefined and have been postponed till next year.
So much is wrong with Government expenditure that it is difficult to know where to start. However, national expenditure must be rolled back if the nation is to start paying its way again. Food subsidies should be abolished within 12 months. Housing subsidies and council housing should be phased out over a period of years. The Civil Service and local authority staffs could be cut immediately by about 15 per cent. without any loss of efficiency. Some hon. Members still need reminding that it is industry and business alone which create wealth in Britain. I am frequently reminded of this in my constituency, which is a wholly industrial area.
I am also frequently told by those on the shop floor as well as by those in boardrooms that there are too many unproductive people to feed in this country.
Public servants are being given increases in pay amounting to 26 per cent. per annum. How many, for instance, of the self-employed will have increases of that kind this year? Many of them, unfortunately, may find themselves having decreases of 26 per cent. in their income. The Chancellor has done nothing whatever for the small business man or the self-employed. Millions of pounds are being spent on education and on the proliferation of our education services at a time when many industrialists complain that a number of young applicants cannot write, spell or even speak properly.
It is defence, and defence alone, which bears the heaviest cuts and which bears them at once. As the Russian spy ships and submarines creep even closer to our shores and ring our oil rigs, we denude ourselves of the ships, aircraft and men to defend the vital interests of this nation.
The Chancellor had no message whatcever for young people, for all those who 328 have left school or university and who want to make a success of their lives and contribute to the well-being of the nation. More and more young business and professional people are becoming disillusioned with life in Britain and with the outlook of the Government. Almost in despair they are thinking of leaving Britain and making their careers abroad. These are the very people whom the nation can ill afford to lose. We shall dilute our national stock if we continue to lose these people and take instead immigrants, with all the extra costs that they involve, apart from the many other problems.
The Chancellor briefly mentioned the social contract, which was only an election gimmick anyway. However, the contract has failed. Perhaps the Chancellor is now the only member of the Government who can do something to curb the power of the great monopoly trade unions. Unless their powers are checked, not only shall we have inflation running at a rate of 20 per cent. or more annually, but parliamentary government may become increasingly threatened. I am glad that the Chancellor has not wholly given way to his Left wing, who listened to his speech with a noticeable amount of coolness. After all, it is they who want nothing less than to destroy our institutions and our democratic way of life.
England cannot survive if we have a dose of full-blooded Socialism with an economic and financial crisis. Somehow we have to bring back a sense of unity and cohesion. Conservative Members would like to see rewards go to those who try, who take risks, and who make the effort, and some discouragement of the amount of envy and greed which we hear so often from Labour Members. The Chancellor should state even more categorically that industry is an honourable calling that alone creates wealth in Britain and out of which everything else is financed. The Chancellor should put economic curbs on the unions to ensure that at least their practices really are democratic, unlike, for instance, the dockers, the subject of our debate yesterday.
There is nothing wrong with the ordinary working man in Britain. but he needs a lead from the Government as well as from his employer and his union.
329 I know full well that many people work very hard. However, in certain industries productivity and labour relations are simply appalling.
There was little mention in the Chancellor's speech of the EEC. It is becoming more and more apparent that many of the Chancellor's colleagues are opposed to the EEC because they fear the competition involved. Unless the British people can try as hard as the French and the Germans, they will simply not survive. If those nations can do it, why cannot we? I appeal to the Chancellor to put his patriotism before his Socialism.
§ 6.10 p.m.
§ Mr. Arthur Lewis (Newham, North-West)
I do not know how many Budget speeches I have listened to over the course of about 30 years. It used to be one a year. Then the average became two a year, and I am not sure that it is not now about three a year. I suppose that I have listened to about 40 Budget speeches. I have listened to all types of persons delivering the Budget speech. I have listened to men—I believe to men alone—of the highest integrity and the greatest ability. They have come from the legal profession, from Customs and Excise and from the Civil Service—indeed, some have become bankers.
Every time I hear one of these Chancellors, of whatever party, he has always "just got it right". These Chancellors know that they have acted according to their budgetary demand, by doing this, that and the other. But then comes the next year and the next Budget, delivered by another Chancellor, who says "Of course, we now have to do it differently from the way that we did it last year because we were not quite correct. We were wrong in our estimates."
I happened to be standing by the Chair, Mr. Deputy Speaker, for most of the Budget speech today, I was listening to the mutterings that were to be heard from the Opposition—what I term the interlocutory remarks, in the interlude which precedes the Chancellor's reaching the guts of the Budget—the interlude formed by what I term the Treasury briefing.
It makes no difference who the Chancellor is; the Treasury knights and advisers draw up all these prognostications, ideas and suggestions. Within a general sphere, 330 the Chancellor may have the opportunity of putting in one or two items, very often after many months or years, during which he should have acted. He does act. but very often it is too late.
I pay tribute to my right hon. Friend the Chancellor for dealing at long last with Krugerrands—but how many approaches have been made to him over many months about this matter? Why has it taken so long to do this? If this action is right, as I believe it is, why did he not deal with the matter last year? Why was it not dealt with when the stable door was being opened, and before the horse had bolted? Why did he not lock the door previously?
Again, with regard to increased taxation and tax dodging—be it by the "lump", or anything else—why does it take the Treasury experts so long to get cracking on these matters? It is they who call themselves experts. I do not have much regard for their expertise or expert knowledge. It is right that the "lump" should be dealt with. But for how long have we been listening in the House to talk of the abuse of the "lump".? It has been years.
The Chancellor is to raise the excise duty on road vehicles to £40. However, he and his Department know about 20 per cent. of vehicle owners do not pay the £25 duty now. What does he do about that? Not a thing. He knows that there is a very high pile of correspondence about people who have deliberately, year after year, refused to pay the £25. The Chancellor of the Exchequer and his Department, the Department of the Environment and the various enforcement departments have been asked to take action. Have they done so? No. What we find now is that the law-abiding citizen who religiously pays his £25 will see that sum rise to £40, but the many people who have been driving around the streets during the past few years and who have never paid a halfpenny will laugh because they will be able to say that instead of saving £25 they will save £40.
I have tabled Questions on this matter. I received one reply only last week. Thousands upon thousands of cases have been reported, but they are the tip of the iceberg. There is a farcical situation in which, if a person happens to be caught after many years, he can offer to 331 pay a mitigated penalty. He pays one-quarter of the arrears and then he is let off the remainder. This makes it a profitable proposition. I cannot see why the Government should increase taxation on those who do pay the duty until they do something about those who do not pay. I am seriously telling the Chancellor that if there should be a vote on this matter I doubt whether I shall support him.
The same thing applies with regard to tax avoidance. For how many years have I heard Chancellors, of both major parties, saying that they will deal with tax avoidance, and so on? No action is taken. There is still a profitable side of dodging taxes, because only some of the loopholes have been closed.
The hon. Member for Halesowen and Stourbridge (Mr. Stokes) mentioned dockers and other workers, and said that some were disrupting the country, and so on, but I have never heard a voice from the Opposition condemning tax dodgers who flee the country and claim to be patriotic. Incidentally, they wait for their knighthoods or OBEs or CBEs before going. These great patriotic gentlemen fly off to the Channel Islands, Jamaica or the Bahamas, or wherever they go, and then issue statements saying how wicked it is that the workers will not work to produce the goods, and so on.
§ Mr. Lewis
Yes, those too, but I am more concerned with the great industrialists who remain here until they get their knighthoods and then flee the country, having made their money. Hon. Members of the Opposition say that we ought to let them have a vote in the referendum on the Common Market. I do not want them to have that vote. If they do not wish to pay taxes here—if this country is not good enough for them and they want to take away their money—they should have no rights at all to vote on the Common Market.
The hon. Member for Halesowen and Stourbridge mentioned the Common Market and the Chancellor's attitude to it. All of the people who have gone to 332 take up lucrative jobs in the Common Market are doing very well, and at the British taxpayers' expense. Every one of them who has a job over there has tax-free perks. He gets a house, a rent allowance and a household decoration allowance. All this is paid for by the British taxpayer. Perhaps the hon. Gentleman, when he is attacking the dockers for asking for extra wages, will tell to my friends the dockers, when they are asking for a 20 per cent. or 30 per cent. increase, that if it is wrong for the docker to have an extra £10 a week—it may well be—it is equally wrong for a Member of the House to get £30 or £40 a day tax-free by attending a so-called European Parliament—sums paid for by the British taxpayer—in addition to receiving his money while he is not here.
Some of the hon. Members who criticise the workers are able to get the equivalent of £30 or £40 a day tax-free. In some instances, if it were grossed-up for tax purposes, it would be worth as much as £100 a day. These Members come here only very occasionally, and say "If only these wicked workers and strikers would get down to it and stop asking for too much."
I recently asked a Question of the Chancellor about the allowance of the noble Lords in the other place and what it was worth to them on a tax-free basis. My hon. Friend the Minister knows that they get £11.50 per day tax free. I do not know if he knows that for some this works out at £67.90 per day. If we work that out for a five-day week we find that it comes, in round figures, to about £300 per week. It is very nice for those noble Lords to speak in the other place about the wicked dockers, the wicked busmen, and the wicked miners—how dare they ask for £50 or £60 a week?—conveniently forgetting the fact that they themselves are drawing the equivalent of £300 a week from the same taxpayers.
I heard my right hon. Friend talk about the inflationary wage spiral and inflationary wages and say that something will have to be done about them. Very good, but I have not heard one right hon. Member from either side of the House say one word of condemnation of the top-rate civil servants who, every year, get a 20 per cent. or 30 per cent. increase in their not inconsiderable salaries. Only yesterday, I think, it was announced that 333 there was to be another 32 per cent. increase for civil servants. I am not attacking them. God bless them, may they be worthy and deserving of this. But it was Sir William Armstrong, when he was head of the Civil Service, who helped to frame the so-called wage freeze and the so-called incomes policy. It did not affect him, mind you. It was a wonderful thing for others, but it did not affect him.
Indeed, the former Chancellor, now Lord Barber, became a bank director. He was in favour of the wage and salary freeze. Did he say to his bank, "Look here, old boys, I have earned quite a lot as Chancellor of the Exchequer and I said we should not have too much in the way of salary incomes because it is bad for the economy, so having now become chairman of this bank I want only a nominal income"? He did not. I have read that he is getting £20,000 or £30,000 a year.
We often find that Chancellors, whatever their party, make great pleas to the poorer, ordinary type of worker to go easy. I am going to suggest to the Chancellor and the whole of the Treasury Bench a way in which they can bring home to the people the grave situation from which we are suffering. I suggest that Treasury Ministers who, in addition to their salary, are now getting a house, coal, fuel, light, furniture, carpets £indeed everything that goes into the grace and favour houses which may be worth £15,000 a year, tax-free—should say: "We are now going to give all that up and live on our ministerial salaries and not take all these extra things for which the taxpayers have to pay, since we are now calling for some degree of restraint."
I could then go to my dockers and tell them that the last Government—all those Tory Ministers—lapped it up and lived in luxury at the taxpayers' expense, in addition to their vast incomes and not inconsiderable salaries, but that my right hon. Friends had now shown how democratic they were by giving up those grace and favour establishments. I am glad to see that the Prime Minister has—I believe—ceased to live in Downing Street. That is good. I understand that it now consists of offices. That is good. I should like to see the other houses, such as that which is occupied by the Chancellor of the Exchequer, given up. I do not mean his house in Sussex, which is his own, 334 or the house he has in Hampstead, which I am told he is letting and getting an income from. Those he can keep. But I do not think he needs to have a State house provided for him at the taxpayers' expense. Let him say: "I am now putting on extra taxes and I want the people to know that this house will now be used not as a private home for a private Minister but as offices." Indeed. he might well be able to put some of the Customs and Excise people into those offices and help them to draw the extra tax.
So often in this House the call goes out to tighten the belt, but it is the belt of others, and invariably of the poorer paid. The hon. Member for Halesowen and Stourbridge laughs, but the point I am making is this: the Chancellor spoke of the high rate of tax–98 per cent.—but I am prepared to gamble that every docker. every engineer, every platelayer, every railway worker, every worker who works with hand or brain, would willingly pay 98 per cent. tax if he had the net result of the money left. But many of them would have no salary at all; they would have to live on the "perks".
A company director once boasted to me that he never drew one halfpenny in salary from his company. When I asked him how he lived, he said: "The company supplies me with my flat. I have a hotel arrangement wherever I go. I have a car and a chauffeur, and I have luncheon expenses. and so on." By the time this was all added up he was getting about £15,000 a year tax-free. This is still happening, I am told. The hon. Member for Halesowen and Stourbridge shakes his head. Let him go down the road and into the first hotel he finds—I think the Savoy is the nearest—and ask them how many companies have suites and rooms for entertaining there, and how many have an arrangement whereby the directors of the companies have accommodation there.
It is quite unfair, to my way of thinking, to castigate and attack the ordinary, poorer-paid worker—or, indeed, the better-paid worker—and then conveniently forget one's own position. I have a clear conscience. I have never attacked them. So, when people say, "What about you?", it is all right. The point I am trying to make is that I am all right, Jack.
335 I say it so often. I declare it. I am all right.
If my hon. Friend the Member for Sunderland, South (Mr. Bagier) walks out of this Chamber at this moment the first hon. Member he meets will probably be a lawyer, or will be connected with the law. How often, when there has been a question of industrial disputes or strikes, have I listened to some great QC—there may be some sitting opposite now—talking about the wicked workers asking for too much salary income? Then I find that these lawyers are getting £10,000, £15,000 or £20,000 a year, and what I think they call a 50-guinea, 60-guinea—or is it 100-guinea per day?—refresher. Talking about restrictive practices—there is no industry or profession in this country which is so restrictive as the legal profession. We see it in this House, do we not? I am not indulging in party politics; the argument applies to both sides.
There are lawyers on both sides of the house. They pair off to do their legal work, because that is better paid than their job here. I do not blame them for this. They so arrange it that they can keep the cases going, because the longer they are kept going the more they earn. I say "earn", but that is a bad word. I should have said "the more money they get". The longer the case goes on the more money they get—the more refreshers, the more fees. But those same hon. or hon. and learned Members, who say that engineers and railway workers—I am glad to see my hon. Friend the Member for Sunderland, South, who ably represents railway workers—should not ask for £2 or £3 a week extra for night or shift work or when they are away from home, do not reveal that they are getting £25, £30, £50 or £100 a day in refresher fees.
I hope that my right hon. Friend and Treasury Ministers, when they start attacking high wage rates, as the Chancellor did, will say at least one little word—which I have not heard today—about some of the most highly paid company directors, earning £20,000, £30,000 or £40,000 a year. I have sent company reports to the Treasury—they are on record—during both the previous Labour Government's wage freeze and the period of the Tory Government, showing that company directors were increasing their 336 salaries and fees by between 20 per cent. and 40 per cent. year after year. Has any action been taken? No. Apparently the Treasury cannot do anything about them because they are company directors.
I do not recall my right hon. Friend's saying that we must make an appeal to the most highly paid people. Therefore, I do not feel that I can ask a dustman, who does a hard, laborious, dirty job, not to ask for his £2 or £3 a week, and to cut down on his demand, knowing that some knight in the Treasury and his advisers are getting double, treble and even quadruple what that dustman is earning and is arranging for some judge—indeed, not some judge—but himself—to get a doubling or trebling of his salary. If my right hon. Friend and Treasury Ministers were to do something about the inequalities in our society, I should be much happier.
I am a little worried about my right hon. Friend's reference to the control of public expenditure, which he did not spell out. Public expenditure will be cut. I know this from experience over the last 30 years. Invariably, when any Government start on public expenditure cuts they land on areas which can least afford them, and usually on the more essential types of public expenditure.
For example, is education to feature in these public expenditure cuts? I do not know. There are schools in my constituency which were condemned 150 years ago, but we have been told that we must put up with them. There are classes of between 40 and 50 children in those schools, and not enough teachers. Indeed, the situation is such that even though it is against the law, schoolchildren in my constituency have had to go on a three-day week. I am not referring to the three-day working week which the Tory Government introduced because of their confrontation but a three-day week for education, because the children cannot get full-time education. Because there are not enough schools or teachers, children have to be bussed out to neighbouring areas. Again, I ask: will expenditure on education be cut?
The Chancellor, although he did not go into detail, said that there were to be some cuts in housing. What cuts does he mean? Where will they be operative? Will they be made on the basis of need?
337 Some people in my constituency have been waiting 30 years for council houses. Some are still living in temporary Nissen huts and others are still living in Portal houses which were introduced for two- to three-year periods during the war. Between 10 and 12 families—as many as 30 to 40 people—are living in houses which should be for only one or two families. There is a big immigrant problem in my constituency, which adds to the difficulties.
My area is one of the highest rate payment areas in the country. Therefore, will the Chancellor, when he considers these cuts, apportion them out? By all means, stop house building in Bournemouth, Boscombe and Bath, and other salubrious neighbourhoods. Let them get on with private house building. Let us stop council building there. But in areas of great need and stress, such as my own, let us try not to cut; let us try to give some assistance and make some improvement.
Lastly, I ask the Chancellor to consider whether a system can be devised which will not only combat inflation but siphon off and channel some of this much-needed money into areas of dire need such as my own—there are others in the East End of London and elsewhere—to improve housing and employment with the provision of factories and workshops and at the same time control the wasteful expenditure that is now going on.
My hon. Friend the Minister of State knows that it is possible for people to get all the luxury buildings and Rolls-Royces that they want, but it is difficult to get some of the essential jobs done because of the shortage of cash and labour. Therefore, I ask my right hon. Friend, when he starts to put some of these restrictions on capital expenditure into operation, to ensure that he does not again savagely hit the already adversely affected areas. Indeed, he can take it from me that he will not get my vote if there is another regressive attack on the poorer areas of this country.
§ 6.38 p.m.
§ Mr. David Mitchell (Basingstoke)
Perhaps for the only time in this House I may find myself joining Members of the Tribune Group in asking the Prime Minister to sack the Chancellor of the Exchequer. We have listened today to a 338 speech in which the Chancellor has admitted his own failures and the way in which he has made the situation worse. For example, he has increased taxation by £1,000 million, but he started by admitting that consumer demand during the next 12 months will be boosted by the £1,000 million which he pumped into the economy last year in his July and November measures. Thereafter, we had a long, turgid, depressing and typically Socialist Budget with no inspiration, no incentive, and full of lost opportunities. For those reasons I think that many hon. Members on both sides of the House, if I judge aright the reception with which the Budget was greeted, will wish to see the right hon. Gentleman's swift departure.
I would like to look at the economic situation which faces the country, the Chancellor and this House, and which we have to tackle. It is a position in which we are suffering from an inflation-led recession, an export downturn-led recession and an investment-led recession. One asks what those three things have in common. What they have in common is that each of them is related to an inadequate amount of capital behind each worker. It is that that I wish to talk about this evening. Perhaps it is also true that it is related to the fact that we have an anti-capital Government, and it is small surprise that a Government who have taxed and overtaxed capital should find themselves in a position where insufficient capital is being invested in British industry.
Let us look at the question of inflation-led recession. The Chancellor spelled out very clearly that this was the situation facing us, no doubt due to the failure of the social contract—and he himself admitted as much in his remarks—which was central to the economic policies of the Government and which we were promised at the time of the General Election would be a panacea to cure all economic ills. Now the Chancellor of the Exchequer stands up and admits its failure and he has nothing else to put in its place.
The trouble is that increased wages are being paid but are not being earned. I do not say that at all unkindly to the dockers whom the hon. Member for Newham, North-West (Mr. Lewis) represents 339 or to any other group in the community. Because it is not by working harder that we can earn more: we can do so by producing more, and that means by having more capital behind each worker. We need to see each worker bringing in more money to his company so that there is more money to pay to him in wages and more for the growth of the company itself. There is no question that the key here is more investment per worker.
Let us move to the fact that this is an export-led recession because British exports are not as competitive as one would wish them to be; and this in spite of an effective devaluation since the time sterling was in the snake of 21 per cent. There has been this very considerable devaluation and still we are not competitive in many markets of the world. The reason, again, is that our costs are too high. Expensive labour costs are too high a proportion of our manufacturing costs and industry's overheads.
We must recognise that the amount of time that industry has to spend on the overhead of complying with regulations has become so great that it is a major cost in any company's operations. I would, with respect to hon. Members of the House and to you, Mr. Deputy Speaker, suggest that the biggest single contribution the House of Commons could give would be an undertaking not to legislate for 12 months. I can think of nothing else which would give greater easement to industry and to many other people in this country. The overheads of industry are increased enormously by the high level of tax necessary to maintain the non-trading, non-productive part of the country's economy. Again, the answer is to cut the tax, cut the overheads, and invest more per worker in machinery, equipment and modernisation.
Thirdly, I said this was an investment-led recession, a major turndown in the investment intentions of industry. This has two effects. First, there is a recession in the companies which manufacture goods and equipment for investment in industry for its modernisation of factories and equipment, but there is a second effect, the effect on those industries which have not spent money on modernisation and find it increasingly difficult to com- 340 pete in world markets. Here, again, there is a need for increased investment.
How has it come about that we have this recession in investment? It is obviously the key to the problems of the British economy. First, we had a Chancellor of the Exchequer who 12 months ago removed a large sum of money from the corporate sector by increasing corporation tax. It was rather like a surgeon saying to his patient "I am sorry that this operation is going to be painful. I am going to have to remove your wallet". What happened to industry was that investable funds were removed by the Chancellor last year. That was the first thing, the Chancellor playing the role of asset stripper and stripping industry of essential funds for investment.
Secondly, on profits, we cannot have the funds for investment unless it is possible for firms to make a profit and to accumulate funds. Many people seem to think that profits are what the boss goes off to the south of France with in his yacht. They are nothing of the kind. Profits are mainly ploughed back into business to enable it to buy stock, new machinery and equipment. Clearly, the current level of profits in British industry is too low, and the Government should be doing something to help, a point to which I will come later.
Thirdly, investment is low because of the uncertainty about the European Economic Community and whether we are to remain in it. What is the answer to this, so far as investment is concerned? First, I believe we should end profit control because industry has to earn good profits if it is to invest in its future. The NEDC report last week suggested that the profits of industry should be a 20 per cent. return on capital at the present time, to take account of inflation. I know that the Government, as their own recommendation, have suggested that its suppliers should have a profit of 22 per cent. Be that as it may, it is something of that order, and yet, when that is the Government's own advice about the level of profits which should be made by industry, so that industry can accumulate funds for investment, the profit control which the Government are operating is preventing companies from making that kind of profit.
341 My second point is that I believe it would be right for the Government to make it worth while for industry to earn profits by cutting corporation tax. It may be asked, how are we to pay for that? Much more vigorous cuts should be made in Government expenditure, and I would draw attention to one very important factor, that high taxation in the corporate sector leads to profligate expenditure by management; because every time a management is considering whether it should have a prestige office, a Rolls-Royce for the chairman or whatever it may be, those who are concerned say "One-half or more than half of this will be paid for by the Chancellor of the Exchequer. It is not coming out of the final net profits of the company." The higher taxation goes, the more this artificial distortion exists. It seems to me there is a very strong case for looking at the whole idea of taxing companies with corporation tax in the way they are taxed today.
Finally, the Government have recognised the need to try to do something about investment. I suppose they have been trying with the Secretary of State for Industry, with his various measures. I have to say to him that he frightens away more than he brings in in the form of investment. It is very much like trying to encourage a rare bird into one's garden and putting a scarecrow beside the place where one is putting down corn to try to attract the rare bird. While we are so desperately trying to encourage investment and capital to come to this country we have the right hon. Gentleman the Secretary of State for Industry and his activities driving it away.
There is no super breed of civil servant able to say to management "This project you should provide ivestment for; that you should not". There is no possibility of the Secretary of State for Industry or his Department being able to make the innumerable decisions that management are called upon to make. The reality is that we should subsidise industry less in the way of grants and the like, and tax it less. We should leave it with the profits it makes, and leave it to the judgment of managers on the spot as to how those profits are to be invested.
Perhaps most important of all is the point which has been so sadly missed by the Chancellor, that if he wants more 342 investment and more capital behind each worker he must stop taxing capital and taking away from the productive side of the economy by means of the capital transfer tax, the capital gains tax, the wealth tax and all the other taxes which he has introduced and increased. It is essential that he stops taking this money out of the economy, because only in that way will he create an economy in which pople have the confidence to invest their money in industry, to put behind each worker that additional investment which is desperately needed.
The effects of the right hon. Gentleman's policies have been to discourage savings and to destroy the motivation of the business community. For these reasons, and the failure of the Chancellor of the Exchequer to create the necessary incentive, I believe that the House should condemn him, and that the Prime Minister should sack him.
§ 6.52 p.m.
§ Mr. Gordon A. T. Bagier (Sunderland, South)
The hon. Member for Basingstoke (Mr. Mitchell) concluded his remarks by saying that the House should condemn the Chancellor. If the hon. Member wants to condemn the Chancellor because he has taken a realistic view of the state pf the country I suggest that he thinks again.
I concede that this has been a sombre Budget. The trouble is that the headlines in the newspapers and on the television news will be that a drop of Scotch has gone up 64p a bottle, that beer has gone up 2p, and that road tax on motor cars has increased from £25 to £40. Those are the things which basically affect most people. The trouble is that the economy is in a dreadful condition. We are now suffering because we have been paying ourselves too much for doing too little, but I believe that the answer lies somewhere farther afield.
One Conservative Member spoke about cutting back on council house building and on the things which affect ordinary people. I believe that he is living in a fool's paradise. This question about public expenditure needs to be carefully analysed. It sounds marvellous to say "Cut back public spending", and we all say that it should be cut, but what does it mean? It means cutting expenditure on the very items which figure most prominently in our letter bags. I have 343 said to the people in my constituency that if they do not believe in public expenditure they must stop writing me letters asking for schools, roads and other things which affect their everyday lives. if people do not believe in public expenditure and in providing the money for it they must not expect the goods to be delivered.
I am worried because in the Budget I detected no sign of how the Chancellor's proposals will protect the area which I represent. When hon. Members talk about public expenditure they should think in terms of a region area like mine where, in Sunderland, there is male unemployment of 10.2 per cent. They are talking about cutting back on school building and road building and on rehousing those who live in the slums of my constituency. They are talking about cutting back the construction work which could provide the unemployed with jobs.
Last weekend I visited St. Aidans school in my constituency. The buildings there are Dickensian, to say the least. They are a fire hazard, a trap. They should be closed, and I think that they will be, but phase 3 of the building programme for that school, which includes a complex to accommodate the pupils, has been suspended because, I assume. public expenditure cannot be provided to meet the cost. I shall certainly be pressing my right hon. Friend the Secretary of State for Education to resolve this matter, and I have no doubt that other hon. Members facing similar situations will do the same. We must have adequate and proper education for our kids.
I visited a science laboratory which was used by first-year science pupils. It has a wood floor and is reached by a wooden staircase. It is a hopeless fire hazard. We have to put up with these inadequate facilities because public expenditure has to be cut back. Hon. Members talk about cutting public expenditure, but they do not think what it means in practical terms.
§ Mr. Teddy Taylor (Glasgow, Cathcart)
Does the hon. Member accept that he could have more schools in Sunderland and elsewhere in the country if the Gov- 344 ernment were to cut back public expenditure by saving the £1,000 million which is to be spent on nationalising North Sea oil and other nationalisation proposals?
§ Mr. Bagier
I do not agree. The hon. Member is talking about cutting back public participation in the profits from Noth Sea oil and gas. Why should the multi-national companies enjoy the profits of the North Sea as they are enjoying the profits from other parts of the world without consideration for the country in which that oil is found? The hon. Member deviated from the point. I was making. In the Budget the Chancellor must get his priorities right, and that does not necessarily mean cutting back expenditure on these items.
The hon. Member for Basingstoke spoke about investment potential. Part of the trouble with this country, particularly under the last Conservative administration, was that the money the hon. Member was talking about was invested in land and property speculation and not in manufacturing industry. That was done because the profit prospects were more attractive.
§ Mr. David Mitchell
It was the Conservative Government's failure to reduce taxation on the business community and on industrial companies which created that situation.
§ Mr. Bagier
The fact remains that the money was being wrongly invested.
I see from the signs being made at me that I have one minute left. I conclude, therefore, by saying that I am sorry that, in view of the situation of the motor car industry, my right hon. Friend the Chancellor chose to increase road tax for motor vehicles across the board to £40. Cars should be taxed according to their size. I cannot see that it is right for a Rolls-Royce to be taxed the same as a Mini. I hope, therefore, that my right hon. Friend will bear that point in mind in future.
§ Debate adjourned.—[Mr. Walter Harrison.]
§ Debate to be resumed tomorrow.