§ Q2. Mr. Geoffrey Johnson Smithasked the Prime Minister if he will place in the Library a copy of his public speech in Manchester on 11th May 1978 concerning the Budget.
§ The Prime MinisterI did so on 19th May.
§ Mr. Johnson SmithDoes the Prime Minister recall that in that speech he said that the Government had an inescapable responsibility for the nation's finances? In view of the fact that the measures 361 announced by the Government today are an attempt to restore some confidence in the Government's management of the nation's finances—measures which, I calculate, involve the equivalent of an increase in the basic rate of taxation of 4p—does he not agree that the truth of the situation is that the Government have got their Budget strategy wrong again for the fourteenth time?
§ The Prime MinisterNo, Sir; the very reverse is the case. I would have preferred a situation in which the Opposition had not pressed their amendments in order to reduce taxation. Then we would not have to introduce the proposed clause that we shall table in due course to recover it by means of the national insurance surcharge. In other words, the Budget was balanced but the Opposition unbalanced it, and now we are putting it back again.
§ Mr. Norman AtkinsonDoes my right hon. Friend agree, however, that those people who believe that the City of London has now taken over the government of this country—[HON. MEMBERS: "Oh."] There is now widespread belief that many money brokers, who are enjoying the greatest bonanza in their history, are demanding from the Government that the minimum lending rate be at least 10 per cent.—[HON. MEMBERS: "It is."]—and that they believe that the Treasury will concede their demands for 10 per cent. Has not the time now come for the Government to stand up to these people and for us to pursue the policies in which we believed during the 1974 General Election campaign, which were based upon a cheap money policy sand the reflation of our economy?
§ The Prime MinisterMy hon. Friend should place the responsibility where it belongs, as I did in my speech on 11th May, to which this Question refers. I said then
I call on the electors—of Hamilton—to show that they disown both the Tory Party and their allies in the Scottish National Party who yesterday combined together in cupidity and irresponsibility.I also said thatwhatever happens in the Division Lobby of the House of Commons, the Government has an inescapable responsibility for the national finances, and if it proves necessary to take 362 action to offset whatever has beau done we shall not hesitate to act".That is what we have done today. The manifesto on which my hon. Friend and I fought the election said that the conquering of inflation was the first and major task that we had. It is in pursuance of the success that we have had so far on that matter that I intend that measures shall continue to be taken in order to ensure that our success is maintained
§ Mrs. ThatcherThe Prime Minister may convince himself by his own complacency, but he will convince no one else. May I put a few points to him? First, this is the fourteenth Budget during a Labour Administration, but the first one to be announced outside the House of Commons. Can he name any other occasion on which a proposed increase of taxation of £1,500 million—the equivalent of 4p on the standard rate of tax—has been announced to the Press but not to the House of Commons? Second, is he not aware that this latest economic crisis—[HON. MEMBERS "Which one?"] The one which has given rise to these measures—began when his Government announced an increase in public expenditure this year of £4,000 million over last year, as a result of which he had to announce an increase in the standard bank rate on Budget day? That was followed by a further increase in bank rate of 1¼ per cent., heralded by a total loss of control of the money supply—all before the reduction in the standard rate of tax of 1p. When will the Prime Minister take responsibility for his actions?
§ The Prime MinisterThe new clause which will be tabled on Report in due course will be debated on the Floor of the House, and the House will then be able to come to a conclusion on it—as, indeed, was forecast by my right hon. Friend when he advised the Opposition—they rejected his advice—not to press their amendment on income tax some weeks ago. We then informed the House that we would table any necessary clauses to recover the situation. That is what we are doing. As for the amount involved, it is about £500 million this year, which is a measure of the degree of irresponsibility of the Opposition, reflected in the votes which they forced on that day. The right hon. Lady is quite correct that if it were carried 363 through to next year the amount involved would be £1,500 million, but I must remind her that we are discussing this year and not next year.
§ Mrs. ThatcherWill there be another Budget in July?
§ The Prime MinisterThere will be another Budget next April, I can promise the right hon. Lady.
As for the borrowing requirement, it is true that both last year and this year it was estimated at £8.5 billion. Last year, it turned out to be about £5 billion, or perhaps a little lower. Because of the difficulties of estimating these borrowing requirements, no one can say to what extent it will be accurate this year, but £8.5 billion is a reasonable figure to take and to work on. No one can say at this stage that it is likely to be over the top —certainly not by comparison with the past two years.
As for what the right hon. Lady calls the bank rate, the minimum lending rate is, of course. 10 per cent. now. I would only like to remind her that when she left office it was running at somewhere between 12 per cent. and 13 per cent.
§ Mr. JayIs it not now perfectly clear that the Opposition amendments to the Finance Bill were wildly irresponsible and highly damaging to the country?
§ The Prime MinisterYes, Sir. My right hon. Friend has put it succinctly. We said this to the House at the time. We regret very much the necessity now to introduce the national insurance surcharge on employers. It would not have been necessary if the Opposition had not voted to reduce taxation in the way they did.
§ Mr. EmeryDoes the right hon. Gentleman realise that with the 1 per cent. increase in minimum lending rate announced today, we have now seen 11 alterations of MLR in under six months? This makes our long-term financial security massively unstable. Will he therefore try to take some action to rectify that situation and perhaps to allow the Chancellor of the Exchequer, because of his actions, to be put out to grass?
§ The Prime MinisterWith respect to the hon. Member, who I think is trying to put a helpful question, this is the way in which the market works. It is the market which has ben fixing these rates 364 during the last two or three years. These short-term rates do not necessarily, of themselves, affect the level of investment or the degree to which people go for investment. I agree with the hon. Gentleman in theory—I should like to see more stability in rates—but as long as the market has been operating them we must rely on the market so to do. Last year, there were 19 such changes. I do not welcome that, but that is the inevitable consequence of the policy which the Opposition support.