FINANCE (REDUCTION OF TAXATION) (Hansard, 8 March 1978)

§ Mr. Nicholas Ridley (Cirencester and Tewkesbury)
I beg to move, That leave be given to bring in a Bill to make provision with respect to the reduction of taxation: and for connected purposes.

§ Mr. Andrew Faulds (Warley, East)
On a point of order, Mr. Speaker. For those of us who do not know—there are so many things about which we do not know; and I am speaking, of course, on behalf of all of my colleagues, on both sides of the House—will you clarify whether a Member is entitled to bring a briefcase, or whatever that thing is, into the House of Commons?

§ Mr. Speaker
I must rule that the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) is not in order in bringing in a Dispatch Box. The real Chancellor of the Exchequer is entitled to do that.

§ Mr. Ridley
I apologise, Mr. Speaker. I had no idea that there was any discrimination in these matters.
Before I reveal the details of my taxation proposals, I shall outline, as is customary on these occasions, the economic background against which my Budget has been prepared. I intend to put the facts fairly and squarely before the House.
This is the thirteenth Budget of this Parliament. I am not sure how many more Budgets it will be possible to cram in before the election. I assure the House, however, that so long as the present Government are in power, all future Budgets will be devoted single-mindedly towards one objective only—that of winning that election.
In each of the past 12 Budgets, as the House knows, we have been promised the golden decade, and an economic miracle has been predicted. In fact, it would be an economic miracle if anything happened at all. There will be ever more hysterical predictions as the election approaches.
The first miraculous prediction is that the rate of inflation will go on falling, despite the fact that the growth of the money supply is now running well above 1426 target. The rate of inflation will be measured either quarter upon quarter or year upon year, whichever gives the lower figure. The Chancellor may even cut VAT again, as he did in order to get the rate of inflation down to 8.4 per cent. in 1974. Even that rate is higher than our main overseas competitors' rates, but they will be lectured and hectored in order to get their rates up in time for our next election.
The next miraculous prediction is that the Government are dealing with unemployment. The right hon. Gentleman the Ancient Mariner told us last Thursday that the unemployment record of Germany is much worse than ours by comparison."—[Official Report, 2nd March 1978; Vol. 945. c. 658.] By this he meant that their rate had gone up from 0.8 per cent. to 3.5 per cent., while ours is stuck at 6.2 per cent. One and a half million people on the dole is hardly a success story—and in my judgment it is likely to get worse.
We are also told that our balance of payments is improving. But the surplus on trading account of £109 million for the whole of 1977 has already been wiped out by January's loss of £179 million. Moreover, anyone who mentions the fact that we have run up overseas debts of £13½ billion since 1974 will be accused of being unpatriotic. But these debts have to be paid back.
The next miraculous prediction is that next year public expenditure will rise by only 2.2 per cent., as shown in the White Paper, Cmnd. 7049. That prediction relies upon counting the nationalised industries' repayment of foreign loans as revenue, without which the increase in spending becomes 2.7 per cent. It also relies on making comparisons concerning the increase in next year's spending plans over this year's spending plans. If one compares them with this year's likely outturn, the figure becomes 6.7 per cent., which is, of course, the true but disguised figure. I think that the House would wish to pay tribute in respect of this matter to the excellent work of the chief book-cooker to the Treasury.
The next miraculous prediction is also in the White Paper. It is that economic growth, which has been completely stagnant for four years, will suddenly rise to an annual rate of 3½ per cent. How this is to be achieved with penal taxation, 1427 bureaucratic interference and the threat of nationalisation hanging over industry is not made clear. The true description of the British economy—this, again, I think, will appeal to the Ancient Mariner—is idle as a painted ship Upon a painted ocean. It is clear that the Government do not even believe their own growth forecasts. Ministers continue to use what the Chancellor calls the "patriotic" and "self-sacrificing" trade union movement in order to hold down the workers' pay.
Next year the voluntary guidelines will no doubt entail a further drop in living standards. The Government will deal with any board of directors which they do not like and which fails to limit pay according to the new voluntary guidelines for free collective bargaining. They will use all their powers, including withdrawal of 714 certificates, the Prevention of Terrorism Act, Regulation 18B, the Mutiny Act and deportation to the colonies, against offenders. As the names of offenders are decided upon by the Cabinet, they must, of course, be kept secret because of the 30-year rule barring the publication of Cabinet papers.
By these means the Government will be successful in forcing down the standard of living still further. It has already gone down 8 per cent. since the beginning of the present Government. I calculate that if we were to go on like this for another 13 wasted years, it would disappear altogether.
If one looks not at the propaganda but at the truth of what is happening in the economy, one comes to the conclusion that it would be unwise to make any substantial net cuts in taxation. To do so would merely accelerate the increase in inflation which is likely to become evident in the autumn, anyway. If inflation is to be got down further, we need a maximum growth in M3 of about 10 per cent. for the coming year.
Nevertheless, it is so vital to reduce the burden of direct taxes that I am going to propose cuts in income tax. They will have to be paid for, in large measure, by increases in indirect taxes—VAT and taxes on petrol, wines, spirits, beer and tobacco. The absence of a Ways and Means Resolution may prevent me from doing this now, but it does not prevent 1428 the Chancellor from doing it in the Finance (No. 2) Bill to follow on 11th April.
My proposals are as follows. In order to help skilled workers and managers, I intend to restore the 1973 value of the higher rate income tax thresholds. This will cost £610 million in a full year. It is essential to do this if we are to retain these people in this country at all.
I also intend to lower the top rate of income tax from 83 per cent. to 60 per cent. If the income is all invested income, the top rate will still be 75 per cent. This would cost £260 million to do on its own, but since I have restored the value of the higher rate thresholds, it will only cost about half that amount.
My Bill will also restore the starting point for investment income surcharge to the equivalent of the value it had in 1973—that is, £4,384 a year. This will cost £140 million in a full year. It is only social justice for the elderly who have saved to do this.
My Bill also restores the value of the personal and married allowances to the equivalent of the values they had in 1973. This will cost £2,250 million in a full year. This will virtually end the poverty trap and let millions out of the tax net altogether.
I regret that I am not able to restore the level of taxation to that applying in 1973, which would entail, in addition, a cut in the standard rate of income tax from 34 per cent. to 30 per cent. That would cost a further £1,950 million, bringing the total cost of going back to Tory tax levels to £5,200 million a year.
Thus the cost of what I propose is £3,230 million. It is not, of course, as drastic as I should like it to be, but to do more expenditure will first have to be cut. I think the Chancellor should increase indirect taxes by £2,000 million, and sell another £1,000 million of British Petroleum shares in order to finance it. The remaining £230 million could properly be taken on the borrowing requirement.
It is urgent to bring the country from the abyss of Socialist stagnation and inertia by cutting taxes. Nobody—not even the Liberal Party—can trust the Government to reduce our penal taxes in order to get the British economy moving again. Parliament must therefore act, and 1429 the way for Parliament to act is to give me leave to introduce this modest Bill.