HC Deb 14 June 1979 vol 968 cc637-760

4.10 p.m.

The Secretary of State for Social Services (Mr. Patrick Jenkin)

I begin this, the third day of the Budget debate, with a proposition which, I believe, will find favour in all quarters of the House—that the well-being of the old, of the sick, of the disabled and of others who need help and support depends, first and last, upon the capacity of our economy to generate the wealth needed to provide such help and support.

My right hon. and learned Friend's Budget on Tuesday had as its primary objective a reversal in the decline of the British economy. I am sure that my right hon. and hon. Friends will agree with me when I say that during the recent general election campaign we found one mood dominating all others, and it was expressed in the remark so often made to us on the doorsteps—"We cannot go on like this."

Our failure to keep pace with the rest of the developed world, our failure to contribute a proper share to the defence of the free world, our failure to secure for our people the rising standards of living which they have every right to expect—all these have bitten deep into our national morale and have led to a debilitating loss of confidence in ourselves.

Not the least of the consequences of this failure has been our inability as a nation to provide the level of social benefits and the quality of health care which can now be seen to be enjoyed by people in other countries. Pensions in Britain are among the lowest in Europe. We spend less on health than do most other Community countries. We cannot provide for the disabled the kind of support which other countries can afford. Our National Health Service, which perhaps at one time may have deserved the sobriquet "The envy of the world", manifestly does not do so today.

This does not owe itself, let me say at once, to any lack of compassion on the part of politicians of either party. It owes itself, perhaps above all else, to the failure of politicians to create the conditions in which commerce and industry, the wealth-creating sectors of our economy, can flourish and provide the resources needed to finance the social services.

My right hon. and learned Friend's Budget is a courageous and imaginative one which seeks, by restoring incentives, by setting firm monetary targets, by cutting public spending and by reducing Government interference, to provide for our people a greater opportunity than they have had for many years to break out of the treadmill of failure which has dogged us for so many years.

On Tuesday the Leader of the Opposition called this a reckless gamble.

Mr. Robert Kilroy-Silk (Ormskirk)

Hear, hear.

Mr. Jenkin

The hon. Gentleman seems to approve, but I cannot think why either he or his right hon. Friend should say that. After all, there was a period under the previous Labour Government, when the right hon. Gentleman was in charge, when the IMF insisted that we should reduce public spending, maintain firm monetary controls and cut taxation. What was the consequence? Those 15 months were the only period under the Labour Government when our balance of payments improved, inflation came down, standards of living began to rise and industrial confidence increased.

I simply cannot understand why, in the light of that experience when the recipe worked, the right hon. Gentleman should think it so impossible that it should work again for my right hon. and learned Friend.

The trouble is that the Labour Government's profligacy since the end of 1977, coupled with all the post-dated cheques which they left behind, has made the situation a great deal more difficult than it need have been. That is why my right hon. and learned Friend has had to take more drastic—even dramatic—action to seek to put things right.

Not the least of the measures which the Chancellor announced on Tuesday was the drastic reduction in public spending this year of some £4,000 million at 1979 prices. It cannot be denied that spending cuts on this scale had been foreshadowed during the election campaign, but when one contrasts Labour's scares during the campaign with what has actually happened. I am surprised that the Labour Party does not hang down its head in shame.

My predecessor, the right hon. Member for Norwich, North (Mr. Ennals)—he was in his place a moment ago, and, I must say, he was one of the worst of those scaring the electorate—said on 29 April: No group would be safe from the axe—the disabled, pensioners, one-parent families and children would all be at risk. He went on: What would they do to the mobility allowance? Would this be frozen? Would there be similar cuts to the invalid care allowance?"— and so it went on and on. Then, on the next day, the Labour Party, in an official statement, put it out that Pension increases would be cut by 5p in the £1. I am glad to see the hon. Member for Ormskirk (Mr. Kilroy-Silk) here, because his was perhaps the most disreputable campaign of all. He it was who put out a leaflet, under the heading What the Tories have planned for you which said: Increasing prescription charges by 300 per cent. Imposing a charge for a visit to a doctor and a stay in hospital. Cutting public expenditure by reducing the number of home helps, health visitors … kidney machines, and others. Reducing pensions and social security benefits. Means-testing the Christmas bonus. I doubt that the electorate has ever had to put up with a more squalid campaign than the one which the Labour Party waged during the last election campaign.

Mr. Kilroy-Silk

I am grateful to the right hon. Gentleman for the brief notice which he gave that he intended to refer to that leaflet. Can he now not confirm that everything that was said there either has come true or will come true? Are we not facing an increase in prescription charges? Are we not facing the loss of home helps and health visitors through the cuts in public expenditure? Did not the right hon. Gentleman's hon. Friend in a debate in this place ask my right hon. Friend, then the Secretary of State, whether it would not be more appropriate to means-test the £10 Christmas bonus?

Will the right hon. Gentleman now give me and my constituents a categorical assurance that he does not intend—as he himself suggested in the debate last year we ought to do, it being his words that I was using—to make a charge for a visit to a doctor or a stay in hospital?

Mr. Jenkin

The hon. Gentleman seeks to defend himself on one of the most squalid and disreputable pieces of electoral propaganda that we have seen. Of course, the Labour Party coupled its scare campaign with a whole series of electoral bribes of its own, for did not Labour offer free television licences for pensioners, universal concessionary fares, a hefty boost to child benefits, and so on?

What did we find when we came to office? Not one penny had been set aside for any of these things at all.

Mr. David Ennals (Norwich, North)

I wish to deal with the last point that the right hon. Gentleman has raised. A decision had been taken by the Cabinet that there should be an increase in child benefit, and it was to be paid for out of the Contingency Fund, which the Chancellor has decided to slash.

Mr. Jenkin

The right hon. Gentleman may say that. There was no money set aside for it. That is what I said.

We know what the electorate thought of that kind of scare and bribe campaign. The result was that my right hon. Friend the Prime Minister led her party to victory by the biggest majority since 1945.

When one compares the scares put out by Labour with what the Government have actually done in this Budget—which, as I say, cuts £4,000 million at today's prices off public spending—one sees that the contrast is even more remarkable. Far from cutting pensions, I announced yesterday the largest increases in history. The present level of the single pension is £19.50. The Labour Party promised to raise it to £22. We are raising it next November to £23.30. I turn to the comparable figures for the married pension. The present rate is £31.20. Labour promised to increase it to £35. Our increase will be £37.30. So much for pension cuts. The same is true of many other allowances and benefits.

The public were told that spending on the National Health Service would be slashed. In fact, we are maintaining overall spending on the Health Service at the same level that we inherited. That is despite the fact that provision was not made for the full cost of the pay claims and settlements that we inherited. Nevertheless, my right hon. and learned Friend the Chancellor of the Exchequer has made it clear that we will honour the previous Government's commitment to provide the necessary increase in cash limits to meet those pay settlements. They decided that, and we have adhered to the decision. The previous Government said that health authorities should plan to find the first £22 million of the excess costs of the pay settlement, and we have kept to that, too.

When we bear in mind that new awards agreed to date already cost over £140 million more than the original cash limit provision, I think the House will agree that we have honoured to the full our commitment to maintain spending on health. Health Service cash limits will, however, not be adjusted for any price increase beyond that already allowed for, and health authorities must plan accordingly.

In addition, we are increasing the mobility allowance. We are increasing the lone parent's addition to child benefit. We are increasing family income supplement, and we will pay a Christmas bonus. When all that is taken together, I believe that the British people—the vast majority of whom do not share the obsessive prejudices of the Labour Party—will recognise that we have gone a long way to protect the more vulnerable members of society.

In a Budget that has to find substantial savings, my programmes could not be wholly exempt. My main contribution is a modest increase in the prescription charge and the charges for dental treatment. I find it astonishing that the Labour Party, with monotonous regularity, can lash itself into a frenzy about prescription charges. It is a fact that prescription charges have been in force under Labour Governments for nearly as long as under Conservative Goverments. Prescription charges have been almost a continuous feature of the Health Service since 1952. It has been felt by successive Governments that when resources are constrained it is not unreasonable that users should make some contribution towards the cost of the Service.

The one brief period when prescription charges were abolished was between 1965 and 1968. A Labour Minister of Health, Mr. Kenneth Robinson, proudly abolished prescription charges on 1 February 1965. A Labour Minister of Health, the same Mr. Kenneth Robinson, reintroduced prescription charges on 10 June 1968. Since then other Labour Ministers of Health—Mr. Crossman, Mrs. Castle and the right hon. Member for Norwich, North have all continued to charge for prescriptions. We were told yesterday that prescription charges are charges on the sick. If they are, they are charges that have been made as much by the Labour Party as by my right hon. and hon. Friends and myself.

Our proposal to raise the level of prescription charges from 20p to 45p is modest. The level of 20p was fixed by my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), the present Secretary of State for Industry, as long ago as 1 April 1971. To have restored the value to today's price levels would have been to raise the charge to at least 53p. A charge of 45p represents a lower real burden than in 1971. Moreover, the cost of prescriptions has risen faster than the RPI. In 1971 the 20p charge amounted to about a quarter of the cost of a prescription, whereas 45p now covers only one-fifth of the cost. We are maintaining all the existing exemptions and we shall continue the exemption for all prescriptions for contraceptives.

I remind the House that the exemptions extend to all children under 16 years of age, to all men aged 65 years and over and women aged 60 years and over, to those in receipt of supplementary benefit or family income supplement, to those with incomes only a little above the supplementary benefit level, whether or not they are in work, to expectant mothers and mothers with children under one year old, to those suffering from certain specific medical conditions, including the housebound, and to war or Service disablement pensioners in respect of prescriptions required for the disablement only.

Further, there is the system of prepayment certificates for those who need frequent prescriptions. The new prices for these will be £8 for a year and £4.50 for six months. That is useful for anyone who is likely to need more than 17 prescriptions a year or 10 in six months.

Similar considerations apply to the increases in dental charges. The first charges for dentures were introduced by a Labour Government in 1951. Dental charges have remained as a permanent feature of the NHS ever since. They were increased twice by the previous Labour Government. Again our proposal is modest, namely, merely to uprate the level of charges by reference to the increase in costs since the level was last fixed. We are also maintaining all existing exemptions. To object to all that is to disown the practice of every Labour Government since 1951.

I go further. When the right hon. Member for Norwich, North, my predecessor, was faced with the unpalatable task of finding savings out of the health budget he did not hesitate to cut back sharply the level of capital investment. Investment in the Health Service was running at only two-thirds of the level in real terms that it had reached under the previous Conservative Government in 1973–74.

Apart from any commitments that my right hon. and hon. Friends and I gave during the election campaign on health spending, if I were to be asked now, even if there had been no commitments, whether I should prefer to find savings by cutting back spending or by increasing charges, which is the way that I have proposed, I have not the slightest doubt where my preference would lie—with charges. I know that that is a view that is shared by the overwhelming majority of British citizens. The trouble with the Opposition is that they always want things both ways. That is what they want when in opposition, and the result is that when in government they get it neither way.

I turn to the change in the formula for uprating pensions. Predictably, the Leader of the Opposition and the right hon. Member for Norwich, North have chosen to use the most extravagant language about the change that we are proposing. Despite all the scaremongering, we intend to fix the uprating of long-term benefits by reference to the forecast of prices. However, that is the minimum that we shall do.

Labour frenzy is clearly contrived. That is not least because Labour Members knew—certainly their political advisers knew—that the uprating commitment in the 1975 Act was not sustainable in the long term.

Mr. Ennals

Oh, no.

Mr. Jenkin

The right hon. Gentleman says "Oh no", but I have no doubt that he has seen the article that appeared in New Society on 17 May written by his former political adviser, Mr. Tony Lynes. The whole tenor of the article suggests that the previous Labour Government were having some doubt about the uprating arrangements which they had introduced. After pointing out—we would certainly agree with this—that pensioners should share in increasing prosperity and should be protected against falling prices—again, exactly our own commitment—Mr. Lynes wrote: combining these two principles however produces a rapid effect; if prices rise faster in some years and earnings in others, pensions will in the long run rise faster than either". Mr. Lynes went on to propose a revised formula which would have the broad intention of protecting pensioners against price rises and ensuring that they shared in rising standards of living. He proposed that that should be done by revising legislation in a somewhat different way from that that we propose, but with the same broad effect. We believe it better that Governments should retain a little more flexibility than Mr. Lynes envisaged.

Interestingly enough, Mr. Lynes said that the change, which would certainly be controversial, could be justified as part of a package, the other elements of which would be making the Christmas bonus a regular, annual event, and phasing out the earnings rule. We shall make the Christmas bonus a regular, annual event, and we are committed to phase out the earnings rule over the period of a Parliament.

I recognise that Mr. Lynes does not speak for the Labour Party. However, he was close to Labour Ministers in the previous Administration. It would be incomprehensible if he did not voice his anxieties to them. It would be even more surprising if they did not, in their heart of hearts, know that he was right.

Mr. Ennals

I hope that the right hon. Gentleman is not suggesting that Mr. Lynes made that suggestion in his article. He did not suggest in his article that the problem of the ratchet should be resolved at the expense of the pensioner. I hope that the right hon. Gentleman is not suggesting that.

Mr. Jenkin

Clearly, the right hon. Gentleman has not read the article. Mr. Lynes suggested that pensioners should be protected against rising prices and that when the standard of living of the rest of the community fell, nevertheless, pensioners should have price protection. That is exactly what we are providing for this year, when prices will rise faster than earnings.

Mr. Lynes said that if earnings rose faster than prices pensioners should not automatically receive that increase until the rest of the community had caught up. That is close to what my right hon. Friends and I put forward. Mr. Lynes suggested that that should be written into legislation. We suggest, in accordance with previous practice, that it should be decided by the Government of the day. I do not understand the right hon. Gentleman's attempted defence of Mr. Lynes article. When he uses the phrase "at the expense of the pensioners", he seeks to fudge the issue.

Shortly, I shall introduce legislation to provide for the payment of the £10 Christmas bonus this year, and in succeeding years with the amount to be fixed by order. We have no proposal to means-test it. Some hon. Gentlemen seem to get a great deal of glee in hawking that around. Why do Members of Parliament seem to derive such pleasure from going round the country scaring the pants off pensioners with totally unreal scares when they were told by me, in writing, that there was no proposal for means testing. I am sure that, on reflection, they will regret electioneering at the expense of the most vulnerable in our community.

Mr. Stanley Orme (Salford, West)

Will the right hon. Gentleman say why, in the election campaign, he did not own up to the fact that the Tories intended to alter the method of calculation for pensioners? I put this question straight to him. He refused to answer it. He fudged the issue.

Mr. Jenkin

The right hon. Gentleman intervened on the question of the Christmas bonus. I find differences in his behaviour. He does not even need to be in opposition. He behaves the same when in government. At one point he described the Christmas bonus as unfair and arbitrary in its coverage. A few months later he presided over its repetition the next Christmas. We made it abundantly clear that the Tory commitment was to protect pensioners against the effect of rising prices. We have honoured that to the full.

There is another advantage of paying the Christmas bonus regularly. It takes the matter out of the electoral bribe position. It is distasteful that the Labour Government should have paid the bonus in 1974 when they knew that they would face an immediate October election. They announced the bonus beforehand. However, they failed to pay it in 1975 and 1976 when they clearly faced no threat of an election. When an election loomed, the Labour Government reinstated it in 1977. When they recognised that they faced imminent extinction in 1978 they did so again. To pay the bonus regularly, by order, under legislation, is an infinite improvement.

Mr. David Penhaligon (Truro)

Has the Minister forgotten the biggest fiddle of all carried out by the previous Government? Following a year of high inflation they decided to index the pension on guessed inflation for the former year, as opposed to the real inflation. That was the greatest single money-saving fiddle to which pensioners have ever been exposed.

Mr. Jenkin

The hon. Gentleman is right. I referred to this in the exchanges that took place after my statement yesterday. In that year, and on one occasion subsequently, the Labour Administration failed to honour the commitment made. It failed to pay an increase in line with what it had led people to expect.

As to the earnings rule, the earnings limit for pensioners will go up from £45 to £52. I apologise for an error that crept into the press notices, copies of which were placed in the Vote Office. The error was not repeated in the Official Report.

The raising of the limit applies only to retirement pensioners and not to the wives of retirement and invalidity pensioners. The right hon. Member for Salford, West (Mr. Orme) will recognise that towards the end of the previous Parliament it became common ground between the parties that different considerations applied to such wives. What is at issue is not the payment of the pension but the payment of the dependency addition. We propose to introduce legislation to hold the current earnings limit for the wives of invalidity pensioners at its present level. This will find favour with the Labour Party.

On the wider issue, that of the future of pensions generally, I repeat and emphasise the commitment made by my right hon. and learned Friend the Chancellor of the Exchequer in the House on Tuesday, namely, that we expect and intend pensioners and long-term beneficiaries to share in the rising living standards of the nation as a whole as the measures of this and succeeding Budgets begin to reverse the long-term decline of our economy.

I deal with one other matter on the subject of pensions with which I am especially concerned and about which I know that pensioners feel very strongly indeed. I was asked yesterday why there must be such a long delay between the announcement of the upratings and the date at which they take effect. I understand pensioners' sense of grievance on this. Although I dealt with it yesterday in reply to several questions, I want again to make the position absolutely clear. The delay results from the uprating of the supplementary benefit which goes with the uprating of the national insurance benefits, because the supplementary benefit uprating is a process which requires 3 million individual assesssments, which have to be made by hand in all 550 local offices. Until the supplementary benefit system itself is simplified and payment made by computer, there is, I fear, no way in which we can shorten this period. We are well advanced in our study of the review report "Social Assistance", which was the review of the supplementary benefit scheme, and I hope to bring proposals before the House later in the year.

I have always been dismayed at the length of time that it seems to take Government Departments to introduce computers on any significant scale. I bear in mind that here we must deal with massive operations nationwide, affecting the lives of millions of our fellow citizens. Nevertheless, it is the Government's determination to press ahead with this.

I turn to the Health Service. We inherited serious problems in the Service. It has been made clear to my colleagues and myself in recent weeks that many people are looking to us to rescue the Service from its slough of despond. I expect that we shall receive the report of the Royal Commission in a few weeks. After two and a half years' study of the problem its views will be of great value, not least in pointing out the shortcomings of our own reorganisation.

There is widespread recognition of the need for a more decentralised, more local health service, for more local autonomy, for less interference from above, for less detailed direction from my Department and for more flexibility with finance. Although we are not making precipitate moves in advance of receiving and considering the report of the Royal Commission, we shall not want to delay long before beginning to move in the direction of a more local service.

However, there is one point which is of special relevance to Members of Parliament. This desire for a much more local service extends to both sides of the House. Therefore, we need to emphasise the responsibilities of local management. Hon. Members can help in this process, as many do already, by trying to deal with individual complaints or local issues and by getting in touch with the people in charge locally.

I do not want my officials at the Elephant and Castle offices constantly to be breathing down the necks of the health authorities, doctors and administrators who are running these local services. However, that is exactly the effect if Members automatically send all their inquiries and complaints to me or to my colleagues. Of course, I am answerable to this House for the policy of the Health Service, for priorities, for financial allocations and for the overall standards of care in the Health Service, but it is quite unreal to argue that this can or should in practice extend to every detail of what goes on in every hospital or doctor's surgery.

When Aneurin Bevan set up the Health Service he was wise enough to build it round the principle that the doctor's primary duty was to his patient and not to the Secretary of State. Health care starts at the point where patients are cared for, and that is the real case for giving as much local autonomy as possible as is consistent with a National Health Service where national finance is the source of funds and national priorities and standards obtain.

We have been through a very difficult winter in the Health Service, which is still very clear in our memories, with a tide of industrial disruption the like of which I hope we shall never see again. This is not the moment at which to dwell on that at length. I can tell the House that my Department and the health authorities are studying very closely the experiences of that period in order to learn the lessons from it. I have decided, in order to strengthen the advice which I get on these matters, to appoint Professor Roger Dyson, a well-known expert in this field, as a consultant adviser on industrial relations. This appointment will, I think, be widely welcomed.

I must say a word about private practice. Among the matters on which we have been working since the election has been our pledge to facilitate the wider use of medical care. Already my Department has been in touch with various interests and bodies in the private sector, carrying the message that the Government are looking for partnership and co-operation and not the endless sterile vendetta of our predecessors. Such bodies include the independent hospitals group, the provident funds, the Registered Nursing Home Association and several others, as well as representatives of the professions.

I and my hon. Friends are engaged in a round of talks with trade union leaders in the NHS. We are making clear that we propose to change the law about pay beds, because we believe that it is in the interests of patients generally, and of the National Health Service patients in particular, that there should be pay beds where there is a demand for them. We are also seeing how the private sector can be encouraged to develop as a service complementary to the National Health Service. I shall shortly be sending out a consultative letter to relevant bodies, including health authorities, setting out our general proposals, and I shall be bringing legislation before the House in the autumn.

In the meantime, I have approached the chairman of the Health Services Board, which, under the existing law, is bound to continue to put forward proposals for phasing out pay beds. I suggested that in the light of the Government's policies, the Board might like to consider how far it needs to go in pursuing the full rigour of the previous Government's policy. I am glad to tell the House that the Board, in its reply to me, has gone as far as I could reasonably have expected. As I made clear, I recognise its legal position, and that until the law was changed it was bound to act under the law as it stands. The Board therefore feels it to be its duty to continue to put forward proposals with regard to beds in a few places where there does not appear to be any case for retention. The Board has told me that it would not intend to submit major proposals for implementation after next January.

It is our hope that the Bill we shall be putting forward will commend itself to the House. I ask Labour Members to consider whether we cannot move forward in a spirit of co-operation and partnership for the benefit of all concerned.

There is no doubt that my right hon. and learned Friend's Budget sets the nation on a new path—a path that is intended to lead to the restoration of our prosperity. The long years of decline have led to a crumbling of morale. Was it not Napoleon who said that morale is to material as three is to one? I know that this is true in the National Health Service, and I suspect that it is just as true in the nation as a whole. For far too long we have lived in the "Why bother?" society, with taxation too high, with incentives eroded and with families finding themselves better off out of work. It is asking too much of human nature cheerfully to give of its best year after year in the face of such overwhelming odds.

It is not only in our economic performance that we have fallen behind our neighbours. Our social services have suffered, too. Compared, for instance, with France, our hospitals look shabby, old-fashioned and over-stretched. Compared with Germany, our pensioners are very hard-up. Compared with Holland, our disabled people, despite the many improvements of the last decade, find it difficult to play their full part as members of society.

What we can afford for our social services has to be paid for by our economic performance. My right hon. and learned Friend's Budget reflects the Government's firm determination to put the country on a path to a better future. No one stands to gain more from this than the old, the sick, the handicapped and the deprived. Not only have we gone the whole way to protect them from the effect of our measures needed to get the economy right; we are offering them the prospect that the Budget measures of this and succeeding years will create the conditions in which the nation can build for itself a brighter future. For this reason alone, the Budget deserves the support of all right-thinking people.

4.46 p.m.

Mr. Stanley Orme (Salford, West)

I certainly agree with one of the later comments of the Secretary of State. The Government have, indeed, set off on a new path. The division which will exist between a Government with this policy and the Opposition will become clear for all to see. When the right hon. Gentleman asks for co-operation, based on this policy, I really think that he is living in cloud-cuckoo-land.

I want first to refer to some aspects of the Welfare State, and in particular to social security. When I was a Minister there were often calls for a new Beveridge, for a fresh start, and it was sometimes suggested that the system was complicated, difficult to understand, and that real changes ought to be made. During the last five years, many changes were made. The pensioners were put on a solid footing and given real increases. We linked uprating to prices or earnings. We gave a much better deal to pensioners generally. We introduced the new pension scheme, which brought 12 million men and women into an occupational type of scheme for the first time in their lives. We introduced child support and child benefit. That was a major step forward, a revolutionary change, for the family, benefiting those in work and those not in work.

Concerning the complications of social security, as the right hon. Gentleman knows, a review was set up and we started to examine this matter. A lot needed to be done, and still needs to be done. With 13 million people a week receiving benefits on a vast scale, and with 25 per cent. of total Government expenditure alone going in social security, a major operation is involved. Many people who wanted simplification were often the same people who in the next breath were demanding fresh benefits and a different structure.

We also created new measures and benefits for the disabled. We helped to bring the disabled out of the darkness into the light.

Much still remains to be done, and in our manifesto we said that we wanted to build upon what we had already done, and to tackle problems which needed to be approached in a fresh way. With the Budget, what we were attempting to do has received a body blow from the Government. When a Government deliberately create inflation at the rate that it will now be created, 17½ per cent. in the forecast, without taking into account other measures already taken by the Government over milk, bread and petrol—

Mr. Patrick Jenkin

I am sorry to interrupt the right hon. Gentleman so early in his remarks, but there is an in-accuracy in what he has said. This fore-cast is the best we can make in relation to the movement of he RPI between November last year and November next year, and it takes account of everything.

Mr. Orme

In my opinion—and I say this with regret—I feel that the forecast of 17½ per cent. will probably prove to be far too low, and that the figure may be in the region of 19 or 20 per cent. That will represent a cut in people's living standards. It is the sick, the pensioners, the disabled and those on low incomes who will suffer from this Budget.

I wish to deal with the position of pensioners. A pensioners' convention is now being held in London, and I understand that the right hon. Gentleman will shortly be meeting a deputation from that body. The convention, convened by the TUC, covers all pension organisations. The convention held in Central Hall has been packed, and there has been a full day's discussion of issues affecting pensions. It has made it clear that penxsioners will not stand by while their standards are eroded but will fight to maintain their living standards.

The Government claim that the present increase is the largest ever given to pensioners, although the right hon. Gentleman skipped over that matter rather quickly in his comments. The reason for that is the right hon. Gentleman's own forecast, which is based on inflation. The right hon. Gentleman is not awarding more than one penny more than that forecast. Therefore, the pensioners' position will not be improved in any way. Indeed, they will be lucky if they maintain their present position.

Mr. Patrick Jenkin

The right hon. Gentleman has almost the shortest memory of anybody in the House. When under the right hon. Member for Leeds, East (Mr. Healey) inflation went to 29 per cent., the Labour Government indulged in sleight of hand. They changed the basis period, so that pensioners never had any protection from inflation. It is a little much for them to accuse us because we are following to the letter legislation that is on the statute book. [HON. MEMBERS: "Oh."] That is what we are doing, and that is what is required under the existing Act. It relates to prices or earnings, whichever are the higher, and this year the forecast for prices is higher.

Mr. Denis Healey (Leeds, East)

What is the figure?

Mr. Patrick Jenkin

The right hon. Member knows that it is not the practice of the Government to publish the figures, and that was the course also adopted by the Labour Government.

Mr. Orme

If we are going back into history, and if my memory is being challenged, I must point out to the Secretary of State that during that period of high inflation the Labour Government gave pensioners a rise twice in one year.

Let me turn to the problems facing pensioners. The proposals made in the Labour manifesto on concessionary fares and the phasing out of television licences still remain our policy. That policy will be implemented when we have the opportunity to do so. But, as I told pensioners this morning, their major problem will not relate to peripheral issues but will be to defend their living standards by fighting to get an increase in the pension.

The right hon. Gentleman mentioned the subject of uprating, and there are problems in the time scale. This is not an easy matter when 3 million adjustments have to be made. Until there is full computerisation, the uprating will take some time. I always found it hard to understand why it was not possible to push matters along a little faster, and no doubt every Minister takes that view.

There is an interesting point about this uprating which is important to pensioners. Last year, based on the proposal related to the link with earnings or prices, I must emphasise that earnings were higher and pensioners received an increase of over 3 per cent. in real terms from last November. When they received that increase, they had a bonus, too.

What will happen this time? The pensioners will look forward to the increase of £6.10 for a married couple in November, but, in the meantime, they will have to face the increasing inflation which will occur immediately following the actions of the Conservative Government. Therefore, the pensioner will have months to wait for the increase, but when he receives it, it will be insufficient to meet the inflation rate. It is ironical that such a large increase for pensioners should be such depressing news. The depressing news lies in the fact that the figure is based on prices and that there will be no real increase for the pensioner as such.

The right hon. Gentleman said yesterday in his statement on social security benefit uprating: I should like to make it clear, however, that it remains the Government's firm intention that pensioners and other long-term beneficiaries can confidently look forward to sharing in the increased standards of living of the country as a whole. That has always been the intention and the achievement of Conservative Governments."—[Official Report, 13 June 1979; Vol. 968, c. 439.] How does the right hon. Gentleman intend to achieve that when inflation is bound to increase immediately? I emphasise that the pension is based on prices. Where, then, will the improvement in real standards arise? Perhaps the right hon. Gentleman or whoever replies to the debate will explain how that will be achieved.

The problems of the pensioner will loom large in the coming period and the fight for pensioners' rights will continue. The trade union movement in 1974 put its weight firmly behind pensioners. The proposal that the pensions should be £10 and £16 was implemented almost immediately on the election of the Labour Government. That gave a real increase to pensioners. What a difference there was when the Conservative Government were elected recently. Therefore, this attack on pensioners—and it is an attack—must be resisted.

It is unfortunate that in opposition the Conservatives did not make their intentions clear. I challenged the right hon. Gentleman on this matter on the radio, but he ducked the issue. Obviously word had gone out because there were differing views in different parts of the Conservative Party.

I wish to make clear to the House that we shall resist this move by all parliamentary means. I give a firm assurance that we shall return to the original basis at the earliest opportunity. We shall base pensions on earnings or prices. I regard the Conservative proposal as a shabby trick. Pensioners are being denied their share in the country's prosperity which happens when earnings are higher and which gives them a real improvement in their living standards.

A lot of noise has been made about the Christmas bonus. What will the value of the £10 Christmas bonus be when inflation rises? In the last Parliament the hon. Member for Wallasey (Mrs. Chalker) said that the £10 bonus was not satisfactory and that what was needed was a fifty-third week for pensioners. At some appropriate time, perhaps she will tell us what has happened to her proposal and whether the Treasury has thrown it firmly out of the window.

The Budget will hit child support and child benefit really hard. Now that child tax allowances have been abolished and there is no increase in child benefit to take account of the 17½ per cent. inflation forecast, there will be a reduction in living standards. That wil affect both families in work as well as the unemployed. I shall return later to the subject of the unemployed.

I should like to tell the House about a case I heard recently on Radio 4. A single-parent lady was interviewed. She has two teenage children and she earns £50 gross per week in a doctor's surgery. Under the tax proposals, she will receive £1.48 relief and a 50p increase in child benefit—altogether about £2. With that amount she has to clothe her two children—the girl being a large 14-year-old who has to wear adult clothes—she has to pay the fares to and from school, and she will have to pay the increased charges for meals in the autumn as well as suffering all the effects of the VAT increase.

The Chancellor said blithely that the VAT increase was on luxury items. I did not know that toothpaste, soap and toilet paper were luxuries. They are basic essentials for any family. When my right hon. Friend the Member for Norwich, North (Mr. Ennals) and I were in the Cabinet we agreed that the money should be set aside from the contingency reserve to make the 50p increase. That 50p—in other words, £1 for the family I have referred to—would be of real assistance against the increased costs that they will have to face. I did not dig out that case—I heard it by chance. However, it is rather a better example than the £100 per week childless family to which the Chancellor referred. There is a great difference.

Mr. Patrick Jenkin

If the right hon. Gentleman had given that family the tax relief as well as the £1 and the child benefit, that would amount to over £2.

Mr. Orme

That family would not now be facing inflation at a rate of 17½ per cent. That is the answer to that.

The Labour Government introduced child benefit to give basic support to the family. I wonder what has happened to the Secretary of State's enthusiasm for child benefit? I remember the difficulty I had as a Minister when we phased in child benefit and the criticism passed by the right hon. Gentleman. At that time he said: I described that fiasco as the graveyard of the Government's social policy. They have tried to redeem themselves, but we are left at the moment with a pitiful shadow of what child benefit ought to be. I repeat the pledge I gave on that occasion."—[Official Report, 17 June 1977; Vol. 933, c. 794.] He went on to state that he gave full endorsement to child benefit.

In July 1977 the right hon. Gentleman referred to the increasing burden of inflation on families with children at all income levels. He said that child benefit must be uprated to ensure that families were not in difficulty because of public expenditure cuts. It was related to an early-day motion put down by him and signed by the Chancellor.

Mr. Frank Field (Birkenhead)

Answer that.

Mr. Orme

The right hon. Gentleman will not answer that. He is on record pressing the Government so firmly on the matter and saying that child benefit was at the centre of Conservative policy, yet, at the first opportunity, the increase that the Labour Government were going to bring about has been stopped. It is a repetition of history. His predecessor, the late Iain Macleod, made a similar pledge before an election and failed to carry it out when he was in government.

Mr. Patrick Jenkin

The right hon. Gentleman seems to forget that the passages that he was quoting from in 1976 and 1977 were at a time when he and his right hon. Friend had been forced by Cabinet colleagues to rat on the concept of child benefit. I remember standing at the Dispatch Box and saying that it was unfortunate that they had done so. By a series of votes and motions my hon. Friends and I eventually forced the Government to move forward until child benefit was raised to a level which extinquished child tax allowance.

The right hon. Gentleman also forgets that child benefit rose to £4 two months ago. We have increased the benefits that were not increased two months ago—the addition for single parents, the child additions for supplementary benefit and national insurance pensions, and the family income supplement of which details will be announced shortly. We have given the increases to the hardest pressed families. Why the right hon. Gentleman feels that that is ratting on a pledge I cannot imagine. Child benefit rose two months ago and he is asking for another increase.

Mr. Orme

The right hon. Gentleman and the Chancellor have admitted that the other categories have been increased because of the inflation that will be created by this Government. For the first time, there has been a major Budget containing neither an increase in child benefit nor in child tax allowance, which has now been abolished. Child benefit has been left behind.

The late Iain Macleod took a similar attitude to that of the right hon. Gentleman. I assume that the right hon. Gentleman put up a fight on the matter and that he tried to persuade his colleagues that it was wrong, because he referred to the phasing in of child benefit. I acknowledge openly that there were difficulties at the time—the difficulties of the IMF—but we did phase in child benefit. A working party was set up with the TUC, the Parliamentary Labour Party and the Government. We introduced it and phased it in fully. We raised it to £4 in November, which was an increase of £1 overall and 70p in real terms. We put £525 million of public expenditure into child benefit to bring it up to that level.

We were working towards indexation, but there is no mention of indexation from the new Government. There is to be no further increase in child benefit for 18 months. What will be the state of families at the end of that 18 months?

The Government stand condemned on the issue of child benefit. If I were the Secretary of State, I would hesitate before eulogising about child benefit.

Another major issue is the desperate plight of the unemployed. The Budget will widen the gap between short-term and long-term benefits. The gap will be £7.35 a week and the Budget, which deliberately creates unemployment—and it will go up considerably—will particularly affect the long-term unemployed, of whom there are about 300,000. The position of those people and their families will be greatly worsened.

We recognise the difficulties of dealing with unemployment. We were struggling to bring it down and were having some success. Now we see the opposite of that action. Public expenditure cuts and lack of support for industry in certain areas will increase unemployment. If any hon. Member wishes to contradict that, let him do so. It has been spelt out for us very clearly.

The position of the long-term unemployed has become desperate and special measures ought to have been introduced for them. The Secretary of State quoted what has been said about the gap between long-term benefits and short-term benefits and the consequent ratchet effect. In 1976, Mrs. Castle made a bigger increase in the long-term benefits to try to reduce that gap. That is the way to tackle the problem. The Government have decided to allow the gap to increase. The unemployed, particularly the long-term unemployed, will suffer very much because of the Budget.

My right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris), who was the Minister responsible for the disabled in the last Goverment, played a major part in ensuring that the needs of the disabled were recognised and many worthwhile benefits were introduced. He sees the present situation as very serious, and I should like to put a number of questions on his behalf.

First, what do the Government intend to do about the serious effect of the increases in both VAT and MLR on Motability, of which the Secretary of State and the Prime Minister are patrons? We did not get a satisfactory answer to that question in the House yesterday.

There is no proposal to protect the disabled who do not pay income tax from the effects of the gratuitous price increases being imposed on them. The Government have failed to show that they can, or want to, insulate the severely disabled from the effects of the quite savage cuts that they are imposing on public expenditure. The disabled will feel the effects of the cuts imposed on local authority spending. What do the Government intend to do about these matters? Those are questions which we are entitled to have answered.

My record on tackling fraud and abuse in social security is well known. I took a firm stand. I was not prepared to countenance fraud or abuse, but, at the same time, I was not prepared to allow a witch hunt in the Welfare State. We must balance the one with the other.

The Secretary of State spoke yesterday about the work done by local DHSS offices. How does that fit in with the reduction in the number of civil servants that he will be making in his Department? He will need more civil servants if he wants to carry out the sort of work on fraud and abuse to which he referred yesterday. Is that work to be excluded from the cuts? Without more civil servants, he will not be able to carry out the thorough-going investigation to which he has referred. The ultimate answer to fraud and abuse is to get a simplified system, full employment and economic growth. That will remove much of the pressure.

The Secretary of State made great play about what Labour Governments had done about prescription charges. I want to state clearly that we were committed, and remain committed, to getting rid of prescription charges. I want to see them go. The right hon. Gentleman spoke as though the increase to 45p was a modest increase, but people going to a doctor are quite likely to get two or three prescriptions and, as many are not eligible for exemption from charges, payments of 90p for prescriptions will be common. That will be a real burden and the amount of money that the increased charges raise will be peanuts compared with the effect that they will have on many people.

The transfer of tax reliefs to the highest paid and the increase in prescription charges for working people sum up this Government.

I wish to ask a question about cash limits in the National Health Service. We allowed for an inflation rate of 12 per cent. to 12½ per cent. and we have been told that the cash limits will cover what we had proposed. However, we are now faced with a proposed inflation rate of 17½ per cent. Will the NHS be fully protected from that 5 per cent. increase?

Mr. Patrick Jenkin

I made clear in my speech that there is to be no further price protection beyond that built in to the original cash limits. We are fully protected for pay increases, subject to the same £22 million that the right hon. Gentleman's Government had allowed for.

Mr. Orme

The right hon. Gentleman has spelt it out clearly. There will be savage cuts in the Health Service. The only way that he will be able to deal with that position on cash limits is by redundancies or by closing hospitals. A 5 per cent. inflation on the budget of the NHS which has not been taken into account by the Government will mean a severe cut back.

Mr. Patrick Jenkin

The right hon. Gentleman has got that wrong because 70 per cent. of the NHS budget goes on pay, which is dealt with under the separate cash limits which, as I spelt out clearly, we had inherited from his Government and applied in the same way.

How much of the remaining 30 per cent. is to be subject to, for instance, VAT is a difficult and complex matter, but only a small part of NHS expenditure will be affected.

Mr. Orme

I do not consider 30 per cent. to be a small proportion of a budget. I assure the Secretary of State that we shall be pressing hard on this matter. We shall want to see what the effects will be, and no doubt some of us will have bitter experience of the effects on the ground before long. Certainly we shall return to this subject.

The emphasis that the right hon. Gentleman put on private practice was an illustration of the difference between private affluence and public squalor, as Professor Galbraith put it on so many occasions. That is what we are talking about. The people with the money will be able to get the medical treatment they want. They will take the pay beds. What is to happen to the vast majority of the people who depend on the National Health Service as such? We believe firmly in a free National Health Service when a person needs it, paid for by the whole community. That is the basis of our philosophy, and we will not move from it. The right hon. Gentleman will not expect or get any co-operation from us for the type of measures he has proposed today.

In the meantime, our people will have to live with the inflation created by the Budget, with the lower standards that that means. The Labour Party and the trade unions, I am sure, will not countenance such a lowering of standards. But, whilst we are fighting here, our people will suffer—and by that I mean not only those who voted Labour but many of those who voted Conservative. Those who will benefit obviously did the right thing in voting Conservative. They will be delighted. But there are others, among them trade unionists, who voted Conservative in the belief that a Conservative Government would give them a lot more money in their pockets and more opportunity who will learn, as the Budget unfolds, that that money in their pockets will not meet the increased costs created by the Budget and which will face them at every turn.

The Opposition believe that there are real difficulties ahead socially and in welfare. The Chancellor of the Exchequer and the Secretary of State for Social Services have spelt out the clear difference of philosophy and approach, and we must see how that develops. I am confident that the British people will eventually reject the divisive policies that the Conservative Government are trying to build on, and I hope that then we can return to Labour government with a policy for the Welfare State which will take it forward again from where it has been so rudely interrupted by this Government.

5.23 p.m.

Mr. Peter Hordern (Horsham and Crawley)

I do not think that it was this Government so much as the electorate who upset the continuation of the Labour Government. The electorate chose to do so for very good reasons. I listened carefully to the right hon. Member for Salford, West (Mr. Orme) when he spoke about pensions, but I could not see why he should criticise the Government for their pensions policy, since they propose to give rather more in pensions than the Labour Government did.

The right hon. Gentleman also spent some time on the subject of unemployment. One of the most shocking indictments of the Labour Government was the number of people unemployed for more than six months. It is they who particularly feel the pressure. They do not get unemployment benefit; they have to apply for social security benefit. The number of those unemployed for more than six months trebled under the Labour Government.

If the policy of the Government succeeds, as I think and hope it will, it will succeed in stimulating business and the economy, and that should provide more employment. That is a much better way—getting more people at work in the economy. That should in itself provide more savings in public expenditure than almost any other item that the Government may propose.

I hope that the right hon. Gentleman will forgive me if I do not comment further on his speech, I was hoping to be called yesterday when we were discussing what one might call the more financial aspects of the Budget, and I am not often called at all in debates on social security.

I believe that the Budget is very bold. I am glad to see the tax changes. My hon. and learned Friend the Minister of State, Treasury, will allow me to say how welcome I find the tax proposals, especially, since some of them are rather familiar. It is not just the tax changes proposed in the Budget that are important but the whole philosophy underlying them. That philosophy is based on the rejection of a state of affairs which allows public expenditure to form such a large part of our economy, and which necessarily, therefore, entails a high level of taxation.

It is fashionable nowadays—led by the Leader of the Opposition—to say that Governments can do very little to control or encourage the economy. The right hon. Gentleman said so at the Labour Party conference in 1976. Mr. Edmund Dell, in a speech widely quoted yesterday—I am not sure that he has not been quoted far more for that speech than he ever was when he was a Member of this House—said much the same thing, that Governments, when they do intervene in industry, generally cause more harm than good. It is therefore nothing new to say that Governments can do little to help in industry. But, generally, the Opposition do not hold that view, and it is a natural progression for all Labour Governments to seek to intervene in the economy. I believe that that is a major reason why our economy has fared so poorly in recent years.

Listening to the right hon. Member for Leeds, East (Mr. Healey) criticising the Government yesterday and saying how hard he had worked to keep down the level of inflation, I thought that it was surprising to hear such things from a man who presided over a level of inflation that doubled in five years. It was also quite extraordinary of him to say that the inheritance that he had handed to his successor as Chancellor of the Exchequer was, on the whole, rather good.

The right hon. Gentleman knows very well that he left behind him a load of rotten apples. It is certain that he would have had to put up national insurance contributions—he said so—and I suspect that he would have had to put up VAT as well. The one thing that marks out the right hon. Member for Leeds, East from many other people is that he has a well-developed thick skin. He has said so himself, so I cannot believe that anyone will attempt to deny it. He reminds me of a famous Australian bush ranger, Ned Kelly.

Ned Kelly successfully held up a number of mail coaches run by a firm called Cobbs during the gold rush. Eventually, he tried to take on a posse of policemen, and did so armoured in a tin suit. Kelly was captured and the tin suit was kept for posterity. The right hon. Member for Leeds, East held the electorate to ransom year after year as Chancellor. I hope that his tin suit will do him rather better than Ned Kelly's did him.

There is a decisive change in policy outlined in the Red Book. I must confess that I have no great confidence in financial forecasts, and that view at any rate is shared by the right hon. Member for Leeds, East, by the right hon. and learned Member for Llanclli (Mr. Davies), and by my right hon. and learned Friend the Chancellor of the Exchequer. I never expected to see the lack of confidence in economic forecasting set out quite so clearly. There is a special paragraph on margins of error, paragraph 19 on page 10, which says: Thirdly, there is no clear presumption that past errors are a good guide to future errors. I cannot see the point in having the forecast at all.

There was once a tipster called Prince Monolulu, of blessed memory. This is rather like expecting him to put down his track record of past tips and saying "However badly I have done, I seek your support this time." Therefore, I was surprised to see this. I very much hope that it will herald the end of economic forecasts being taken seriously. If it does, it will also mean that there is a good deal less guidance by the Government in economic management and demand management, a touch on the tiller, and so on, to which all Governments have been susceptible for many years. I hope and think that that might at least come to an end.

I do not mean that demand management itself must come to an end—absolutely not, for we now have the clearest signs of demand management that have been available for a very long time. It is clear how it is to be done. There is to be a closely regulated public sector borrowing requirement and a diminishing movement in money supply year after year. I should like to see the money supply figures set out year after year, and I should like to see them progressively decline.

My second point is that the tax changes are not the only important feature of the Budget. What is important is the whole change in the direction of economic management. What is plainly being said is that there is now only a limited amount of money within which the economy can work.

I put this to my right hon. Friends more as a comment and expression of view than anything else. I wonder whether they have thought about it. It seems to me that this policy is likely to engender a good deal of confidence in other countries. If so, there could well be a much larger inflow of funds into this country than has been seen for some time. If that happens, the Government will have to be very careful in how they treat the exchange rate policy.

If the Government try to keep the exchange rate down, that will only mean a further flow of funds into the economy, which will make the monetary policy almost impossible to handle. But if the exchange rate rises, as it very well might to a significantly higher level than at present, there is no question but that companies will find themselves in an extremely difficult position in competing overseas, and they will find it difficult for extra wages to be paid on anything like the scale that is forecast, even in the Red Book.

Therefore, I do not believe the economic forecasts. My right hon. Friend the Secretary of State for Social Services has forecast, on the best available evidence to the Treasury, that inflation might be going up to 17½ per cent. by November. I have no idea what the level will be, but if sterling is as firm as I think it might be, it might be significantly less than that.

I have one final comment about the importance of cash limits. My hon. Friend the Financial Secretary mentioned them yesterday, and I was interested to hear what he said. We understand that cash limits are to be published quite soon, covering the usual number of Departments. It is important that those cash limits should be clearly set out and that all pay increases should be held within them. My hon. Friend did not say that yesterday. He was not able to give that specific assurance. I hope to hear it from my hon. and learned Friend the Minister of State later today or from my right hon. and learned Friend the Chancellor on Monday. It is very important that wages should be held within the cash limits. Otherwise, no confidence can be attached to this policy.

As my right hon. and learned Friend the Chancellor said, we have seen a historic Budget. It is a turning point in our fortunes. I do not for a moment think that we are in for anything other than a rough ride along a bumpy road, but, if we manage to follow it, that road leads to prosperity.

5.34 p.m.

Mr. David Ennals (Norwich, North)

I agree with the hon. Member for Horsham and Crawley (Mr. Hordern) that the consequence of the Budget will certainly be a rough ride on a rough road. I go much further. I shall deal, as the hon. Gentleman would like to have dealt, with the question of cash limits.

This is not a maiden speech, but it is for me a maiden speech from the Opposition Benches, the sort of maiden speech that I hoped never to make, though I am happy to be making it. At least I do not have to be non-controversial.

The Government have made great play in the debate so far of standing by their election pledges. In many ways they have done so with a vengeance. Public spending cuts are there. There is to be the sale of public assets. We do not know the exact details, and I do not think that the Government do, but the sale is coming. There is a monumental transfer from direct to indirect taxes.

I do not want to go down the list of pledges that have been honoured. I want to deal with four factors that were not put before the electorate but are now known to the House.

I do not believe that even Conservative Members expected that yesterday there would be an estimate that by November and directly as a result of actions taken by this Government, the inflation rate would be 17½ per cent. I do not believe that if the public had been told that that was the intention the Conservatives would have achieved the success that they did.

I want secondly to deal with two other matters that were not in the Conservative manifesto. Both were touched on by my right hon. Friend the Member for Salford, West (Mr. Orme). The first is the Conservatives' unbelievable Uturn on child benefits. Their decision to disown Labour's plans for a 50p increase in November is deplorable. It goes back on all that they said when they were in Opposition. They have not denied that their decision virtually means that for the next 18 months there will be far from merely no further improvements, a steady decline in family support.

How can the Government possibly justify that betrayal? When in Opposition, they were with us in Parliament when we put that provision through. At one time they claimed that it was virtually theirs. There were two parts. One was that we would phase out child tax allowances, and the other was that we would introduce child benefit. Now the Conservatives have stood by one side of the bargain, in that there is no child tax allowance, and have ratted on the other.

Of course, we had our difficulties. Instead of being able to introduce the provision at one fell swoop, as we had hoped, we phased it in, but phase it in we did. We fulfilled our pledges, even though it took longer than we intended. Our record on child benefit is one of which we have reason to be proud.

My right hon. Friends and I had to put up with many pious lectures from the present Secretary of State for Social Services about child benefit, about how we had betrayed it, and so on. The right hon. Gentleman claimed it as if it were his brain child. If it was his child, it seems to have gone out with the bath water. I cannot understand how he now has the nerve to try to justify his action. If family support was to be a casualty of public expenditure cuts, why was there not a little honesty about it during the election?

I heard what the right hon. Gentleman said during the election about child benefits and his support for it. I do not know whether all that was sheer humbug or whether he has lost his first battle in Cabinet.

Nothing was said about legislation to deny to pensioners the right to share in rising living standards. It may be that there will not be any rising living standards. But in his speech yesterday, the Secretary of State made some almost incomprehensible comments about wanting to achieve the result that pensioners should share in rising living standards while at the same time intending to introduce legislation to deny that right to them. I worked my way through the mumbo-jumbo of that paragraph. The usual abuse of mumbo-jumbo is to blame the civil servants who drafted it. I do not blame the civil servants. I trust too well those civil servants at the DHSS to think that they drafted the right hon. Gentleman's speech. It must have come directly from the Minister himself.

During the election, I warned many times that pensioners should know that it was the intention of the Tories, if returned to power, to change the basis on which pensions were raised. I was accused of rumour-mongering. I was not rumour-mongering. I am proved to be right. I had hoped that at some stage during the election the Tories would say that my allegations and my beliefs were wrong. I was proved to be right. I wish that there had been a little honesty on this issue during the election.

I have looked through the glossy Conservative election manifesto. Nothing was said about no further increases in child benefits. Nor was anything said about the different basis on which pensions for retired people would be calculated. The Government are coming forward with a squalid measure. I am glad that my right hon. Friend the Member for Salford, West said that the Opposition Front Bench and Back Benches alike would fight with all the strength at our disposal. A great deal of that strength will come from elderly people themselves. There is no joy for them in an announced high pension increase. It is only a high pension increase because the Government have taken decisions that will force up the inflation rate to a figure that is roughly what pensioners will get in November.

Let us consider the plight of the elderly. A sledgehammer will hit them straight away. There will be some protection and cushioning for earners in terms of tax reliefs. There will be no protection for pensioners living on the retirement pension. There will be no protection for the sick and disabled. There will be no protection for the unemployed. For five months, between now and November, they will face the full consequences of the decisions taken by the Chancellor of the Exchequer to force up the retail price index immediately.

The pensioners are now receiving a pension which is 3 per cent. higher than last year's price increases. My right hon. Friend said that they had got a bonus. They are still living on a pension increase that is above the inflation level. Due to the folly of the Chancellor, it will be 6 per cent. less than has been promised by the Tories. They will face during the next five months a period of inflation way above the level of the pension increase that they received in Nov- ember. It is a disgraceful betrayal of pensioners' interests. I believe that the pensioners' organisations will combine to fight the legislation promised by the right hon. Gentleman.

I want to explore the hollowness of the Chancellor's statement, repeated by the Secretary of State today, that the National Health Service will be protected from public expenditure cuts. That is simply not true. The Secretary of State will put in his knife through cash limits. It is clear that there will be enough hon. Members on the Government Benches to make certain that those cash limits are applied fully. What does this mean for the National Health Service? The right hon. Gentleman confirmed today that he will not raise cash limits to cover prices higher than those provided for in cash limits published by the Labour Government in January. Those cash limits were based on estimates of price inflation very much lower than will now be the case as a result of decisions that have been brought forward by the Chancellor in his Budget.

Mr. William Clark (Croydon, South)

How much lower?

Mr. Ennals

Four per cent. at least. The Secretary of State himself anticipated a 17½ per cent., November-on-November increase in prices. He did not say so in his statement, and it had to be dragged out of him. The cash limits were set at less than 10 per cent. at a time when the inflation rate itself was well under 10 per cent. So what does this mean to the National Health Service? It will mean a drastic reduction in resources available for the provision of health services up and down the country.

Disregarding the pay implications from which there will apparently be some adjustment, which the right hon. Gentleman said would be the same as would have applied under the Labour Government, we have to deal with the other 30 per cent. relating to prices. As a result of the Budget and the decision on cash limits, I calculate that there is likely to be a cut in real terms of about 3 per cent. in Health Service expenditure. Perhaps it is marginally more or marginally less than 3 per cent. I hope that when he replies to the debate, the right hon. Gentleman will give the figure. It will have disastrous consequences upon the National Health Service.

As one who held the high office of Secretary of State for three years, I have to tell the House that never in any one year was I satisfied with the growth rate for the National Health Service. I always wanted to see more. We were living through a difficult period in the economy of our country. We are living through a difficult period today. But in no year was there no element of growth. The House must recognise that anything less than 1 per cent. growth rate is a real cut.

Apart from the cuts that will take place in social services, with which there is no time for me to deal, I fear for the National Health Service and the resources available for the health authorities.

I should like to put four specific questions with which I hope the Minister will deal in his reply. I want to know the Secretary of State's estimate of the real cuts as a consequence of the cash limits and budgetary decisions. I want to know how many jobs he expects will be lost in the National Health Service. I want to know how many wards or beds will have to be closed and what changes in Health Service priorities will follow this ruthless policy. Who will suffer most? Will it be the elderly, the mentally sick or the mentally handicapped? Who will be the sufferers? If it is claimed that all this will be paid for by charging the sick more than double the previous cost of prescription charges, he knows that this is only a drop in the ocean. I wish that the Secretary of State was here, but no doubt he will read my remarks in Hansard.

From the Front Bench yesterday, I welcomed the right hon. Gentleman to his post and said that I did not underestimate the difficulties that he would face. But what a start he has made to his reign as Secretary of State for Social Services—a betrayal of the commitment to the pensioners, putting child benefit on ice, big cuts in Health Service expenditure and a start in transferring the cost of the service from the taxpayer to the sick. What a way for a Secretary of State with great responsibilities to open his career in this Government.

5.50 p.m.

Mrs. Sheila Faith (Belper)

I am grateful for the opportunity to participate in this important Budget debate. I begin by thanking the Officers and Members who have helped me in my first few weeks here. I should like to live through the last few thrilling weeks again without having to contend with the fatigue which follows a hard-fought election campaign. I enjoyed my battle at Belper, but I was sorry that my victory was at the expense of Roderick MacFarquhar, a man of great intellectual ability and an acknowledged world expert on Chinese affairs. His dedication to the constituency was sincere and widely acknowledged. I hope that he will have an opportunity to use his undoubted talents to the full, and I wish him well in future.

I must also mention Roderick MacFarquhar's immediate predecessors, who both contributed greatly to my victory at Belper. Geoffrey Stewart-Smith blazed a trail for me when he won the seat in 1970. He left behind a good name both for himself and for the Conservative Party.

Of course the name of Lord George-Brown will always be synonymous with Belper. Wherever I go in the constituency he is always spoken of with affection and respect. During the recent election campaign Lord George-Brown advised Labour loyalists to turn away from a lifetime's allegiance because of his real concern for the freedom of the individual. I know that his words were heeded in Derbyshire.

Everyone remembers Lord George-Brown's moving speech at the count of 1970, when he spoke of his great love for the constituency. I can understand his feelings. Belper is a most beautiful constituency—and I cannot single out any particular community.

Since coming to live in Derbyshire I have grown to respect and admire the down-to-earth and hard-working approach to life of its people. They are privileged to live in such green and pleasant surroundings, just as I am privileged to be their Member of Parliament and Derbyshire's first woman MP.

This year Derbyshire is holding a festival throughout the summer until October, designed to tell the rest of the country what a good place Derbyshire is to live and work in. Tourists are now being attracted to our area in ever-increasing numbers.

My work will be particularly stimulating and interesting because Belper is virtually a microcosm of the United Kingdom, containing as it does two towns with real strength of character, many delightful villages and beautiful stretches of countryside.

The northern part of my constituency, which centres on Belper town, has a long tradition of success in textiles, engineering, chemicals and pottery and is deservedly one of the most prosperous areas in the coutnry. Many of my constituents are employed by British Rail and Rolls-Royce at Derby. When my right hon. Friend the Secretary of State for Industry visited the constituency last year, he referred to the northern area of Belper as a paradise, because unemployment is almost non-existent.

The southern portion of my constituency centres on the town of Swadlincote, which was primarily and until recently the centre of a mining area. Because of its wonderful work force and facilities it has been successful in attracting a diversity of new industry, in addition to carrying on its traditional role.

Swadlincote is also a commuter area for Burton-on-Trent, with its breweries, tyre production and other important industries. Unemployment in the Swadlincote area is a constant source of concern to me. I therefore welcome the fact that the Budget proposals will concentrate help on and provide assistance only to those areas of exceptionally high un-employment. Swadlincote has been at a distinct disadvantage, because in the past a great proportion of the country benefited unfairly from the development policies of the previous Government, while Swadlincote did not qualify for any regional development grant.

I am convinced that the whole of my constituency, and the Swadlincote area in particular, will benefit enormously from the Chancellor's proposed new system of allocation of employment support. Farmers in my constituency will welcome the Chancellor's decision to make changes in capital taxation, although they will not be carried out immediately.

One of the best features of my constituency is the high proportion of small business enterprises, for this is a great area for initiative and enterprise; there is no region that contains a greater diversity of skills or has a greater history of innovation. I am sure that there will be great benefit in the long term from the Chancellor's taxation policies, designed as they are to encourage initiative and investment.

As a dental surgeon I am particularly interested in the provision of health facilities. I am glad that we have been reassured this afternoon that there will be no cuts in the Health Service budget. The southern half of my constituency is part of the West Midlands health authority and is in the catchment area of Burton general hospital. Indeed, a third of the patients using that hospital live in my constituency, while the north is catered for by the Trent regional health authority and patients use the facilities of the Derbyshire Royal infirmary.

Both those hospitals do excellent work and have a high reputation, but the geriatric provision for people in the north leaves much to be desired, because there is an acute shortage of beds. The whole area relies for many of its services on Derbyshire county council. I know that the social service department, because of the shortage of hospital provision for the elderly, coupled with the dreadful legacy of outdated old people's homes, is concerned about this aspect of its work.

I am aware, of course, that there is a great need to cut public spending so as to release resources for private industry and that, when a large proportion of our money is spent for us by local and central Government, there is an underlying threat to our freedom. The recent general election showed that the British people realise that the weight of taxation bears unfairly on those who are prepared to take responsibility and to train for special skills.

The Chancellor therefore spoke for everyone when he expressed the need for a new beginning. However, I should like to point out to the Chancellor and to the Secretary of State for the Environment that in May 1977 the people of Derbyshire voted for a new beginning. The Conservative Party took control of the county council then, and within three months undertook a complete review of the council's budget.

The cumulative savings arising from the review of spending for 1977–78 and 1978–79 amounted to £2.4 million. The social service department alone, in spite of the difficulties that I have mentioned, made cuts of £440,000. Derbyshire county council has kept down the rates and cut waste. The council has managed to keep down costs by careful housekeeping and stringent economies and has reduced staff by natural wastage.

Conservative-controlled councils such as Derbyshire have been less profligate than others, having faced the fact that, in the national interest, there must be a temporary halt to spending and expansion until dynamism is restored to industry. Councils such as Derbyshire realise that the restraint on public spending will have to remain for a long period, yet we still hear of Labour-controlled authorities proposing to waste money on expensive and unnecessary frills.

I ask that the people who had the good sense to vote Conservative in 1977 and who endured immediate cuts in public spending in their own areas should not be penalised for having behaved in this most sensible and patriotic way. I know that the people in my constituency will rise to the new challenge and take advantage of the opportunities that the Chancellor has given them to restore and rekindle the spirit of enterprise in our great nation.

5.58 p.m.

Mr. Frank Field (Birkenhead)

I, too, am grateful to have been called in this debate. I begin by paying tribute to the hon. Member for Belper (Mrs. Faith): I hope that I manage to deliver my maiden speech with equal eloquence. As I disagreed with practically everything that she said, I look forward to crossing swords, metaphorically, with her in the debates that we are bound to have in the years ahead.

There is general agreement in the House—or perhaps I should say there used to be—on the manner in which maiden speeches should be delivered. The first convention is that new Members should comment on their predecessors. I am happy to follow that practice. Edmund Dell won and built a distinguished political career. Those hon. Members who knew him know that he is a shy man who dislikes loud talking. He will wish to be remembered by his record rather than by any fine sentences which I can put together at the beginning of my maiden speech.

The second convention laid upon those who make maiden speeches is that we should comment on our constituencies. I am immensely proud to represent Birkenhead. I hope that I do not misjudge the mood of my electors when I say that they have no wish for me to reflect endlessly on their past glories. I am sure that they would rather I used my position here to give voice to their present anxieties and to fight to prevent their fears about the future seeing the light of day. That brings me rather neatly to the debate.

The main thrust of the Chancellor's strategy is to achieve growth. Few of my hon. Friends would disagree with that goal. In order to achieve growth the Chancellor believes that we should give incentives. Few of my hon. Friends would disagree with that objective. We believe that hard work, training, responsibility and danger should be reflected in the rewards that people receive for their work.

The main disagreement that dominates the Budget debate involves how we should give people incentives. The emphasis in the Tory Government's Budget proposals is that those incentives should be given by making society even more unequal.

I wish to do two things. First, I wish to describe the incentives that could have been given without making society more unequal. Since the Government did not go down that road, I wish to prove that the price of giving those incentives to the high flyers will be paid largely by those on average earnings and those who many of us call poor.

How could we give incentives and cut taxes in a way which is different from the Government's strategy and which does not penalise the poorer people? We have heard much today about the Welfare State. But there are at least two Welfare States. The first is the traditional Welfare State, which we have spent much time discussing. The second is the tax allowance Welfare State, which, while it benefits many people, overwhelmingly benefits the richer people. Expenditure on the tax allowance Welfare State grows like Topsy.

If we ignore the personal or structural allowances in the tax system and concentrate on cutting expenditure on the non-structural allowances, such as reliefs on mortgages and incentives to save and to contribute to pension schemes, we can reduce the standard rate of income tax by 7p in the pound. But that opportunity was not seized by the Government, for the simple reason that those who benefit overwhelmingly from this Welfare State are the richer members of the community. Instead of doing that, the Government produced a tax-cutting Budget which will, to a large extent, be paid for by those on lower incomes.

We now see clearly that those cuts will fall in two ways. First, there is to be a switch from direct to indirect taxation. We have had no figures from the Government to suggest that the move to indirect taxation will not hurt those on lower incomes more than others. We are told that the indirect tax system exempts many purchases from tax either by exempting them or by subjecting them to zero rating. But the Budget changes and the increases in indirect taxation will mean hardship to families on low incomes. It is a regressive move.

The increase in contributions by those on lower incomes will represent a higher proportion of their incomes than it does to those on higher levels of income. The first way that we are paying for this incentives Budget is by the move from direct to indirect taxation which puts the burden increasingly on the poor. The second way is by cutting public expenditure. We saw more clearly how much that is to be cut from the Secretary of State's statement this afternoon.

The cuts will fall, first, on those who are in receipt of the major insurance benefits. We are told how good the new Conservative Government's record is. Yet if they go ahead with their proposals for the revision of benefits they will break the provisions of the current Pensions Act. Whether one examines their calculations by the earnings variable or by the prices variable, one can see that there is a shortfall this year. There are real cuts above what there would have been if the pension had been increased according to the Labour Government's formula. I see that the hon. Member for Wallasey (Mrs. Chalker) disagrees, so I shall spell out my argument more clearly.

We now know that earnings are expected to go up by about 15½ per cent. There is a shortfall on the last increase, not of 1.9 per cent. as the Secretary of State said yesterday, but of 1.8 per cent. During the election pensioners were promised that they would be protected from VAT increases. If one adds on the 3.5 per cent. increase in the retail price index, one arrives at a figure of 20.8 per cent. Prices are expected to rise by 17.5 per cent. With the 1.8 per cent. shortfall one arrives at the figure of 19.3 per cent. By whatever formula we use, this represents a real cut and a real shortfall. The Minister for Social Security smiles. He is lucky enough not to have to depend upon State benefits, although many of us hoped that after the last general election he would be a recipient of unemployment benefit.

It is extraordinary. If the Government break the provisions of the Act, the organisation for which I used to work and which took my Government to court will test the legality of that action in court. The Secretary of State has spelt out too much today to get away with a fiddle such as the Labour Party did a few years ago. I think that the courts will find against him. If he does not want to risk going to court he must introduce retrospective legislation to give him the power to break the Act.

That will mean that we shall see the first act of secondary picketing by this Government against pensioners. The Government will take retrospective powers to deny them the pension increase to which they are entitled.

There is also to be a cut in short-term benefits. It will mean a cut of almost 50p a week for the family with an unemployed main wage earner. In the last regime there was the milk snatcher. In this regime are those who will pinch 10 bob from the unemployed and sick.

The Government intend to make major savings in public expenditure by ensuring that benefits increase only by the same amount as earnings. They do not plan to use the more generous formula which we implemented involving rises linked to prices or earnings—whichever is the greater. Those who are poor and dependent upon benefits will pay more than their fair share for the cuts in public expenditure.

In addition to the Government's planned redistribution of help from poor to rich there is to be a switch from helping those with children to helping those without. This is not a class issue and I hope that there will be agreement across the Chamber. The group that has lost out are families with children—whether the families are on £20,000 a year or £1,000 a year. There were all those fine statements by Patrick and his lion-hearted friends, some of them now sitting on the Government Benches. They hiked their principles around on stilts before the last election pronouncing on the importance of child benefits. What a sorry sight they present today. It is worth recalling just some of the promises they made when their backsides were safely settled on the Opposition Benches. I recall one statement and pledge from the Secretary of State for Social Services, made to that holy of holies the Conservative Party conference in 1977. He said: We must concentrate relief where there are dependent children. I give you this pledge: the next Conservative Government will retrieve the child benefit scheme from Mr. Healey's wastepaper basket and give it top priority. That was some retrieval and some top priority.

The hon. Member for Wallasey is here, and it is as well to recall what she promised in this Chamber in April 1978. Talking of the child benefit scheme, she said that it was a major part of the Opposition's family policy".—[Official Report, 12 April 1979; Vol. 947, c. 1392.] So much again for Tory pledges from the safety of the Opposition Benches.

The spectacle that we are witnessing today is sad for two reasons. Families with children, whether those families be rich or poor, have lost out. That is something we all ought to mourn. The spectacle is also sad from a personal point of view. The Ministers from the DHSS knew that this was the issue which would test their mettle against the new Prime Minister. We have seen them fail to live up to their promises. It is sad to see a broken-backed Secretary of State for Social Services so early in this Parliament. Because they failed to deliver what they have promised, all families, rich and poor, will lose out.

The tax burden is shifting back to families with children, and the poorest have been hit hardest because the most effective way to fight family poverty is by increasing child benefits. I know that the Secretary of State is unable to be here for this part of the debate, even though he was aware that I was to speak about him personally. He is wrong. I hope that he will look again at his statement that his proposals will help the poorest. It does not tie in with what my right hon. Friend the Member for Norwich, North (Mr. Ennals) was saying in his Eleanor Rathbone lecture this year. Family men in work who have children have been losing out and they will continue to lose out under the Government's proposals. Little will be done for them unless they are able to claim means-tested assistance.

That brings me to the third sad aspect of the Budget. The Prime Minister says that she wishes to create a society in which there is an incentive to work. For those on lower incomes her Government's Budget does the opposite. I share the feeling of some Conservative Members about our failure to convince her of the importance of child benefits as an incentive to work. The Government have increased the dependency allowances for those who cannot work and who have children. They have not increased the income for those who work, and therefore they have increased the disincentive to work, the very point that the Budget was designed to deal with.

I have tried to highlight three powerful ways in which the Government are trying to redistribute resources in our society. They have redistributed to the rich by leaving intact the tax allowances Welfare State. They have redistributed resources by making sure that those on lower incomes lose out, either by their increased contributions through indirect taxation or through their loss of some of the benefits increases that they could have expected and that some of us on the Labour Benches would have fought for under the public expenditure cuts.

The third important redistribution is that the tax burden has once again been shifted back on to families with children. All that has been done in the name of securing growth. That will be the real test of the Budget. Will we get growth? Will we, four years hence, see more people in work as a result of these proposals? One of the fears of the electors in Birkenhead is that not only in Birkenhead or Merseyside but in Britain as a whole more people will be unemployed at the end of this Tory Government than at their start.

I hope that the Minister, in replying to the debate tonight, will pick up that challenge among all the others that have been made. Do the Government believe that this Budget, which in many ways is exacting, and which is trying to break for growth in a way of which I disapprove, will be successful in reducing the number of unemployed by the time we next go to the polls?

6.16 p.m.

Mr. Richard Alexander (Newark)

I congratulate the hon. Member for Birkenhead (Mr. Field) on his maiden speech and on the lucid way in which he put forward his points. One may disagree with his aims and his conclusions, but one must admit that it is a privilege for the House to have an expert in a particular line to address it as he has done this afternoon.

To make a maiden speech is obviously an occasion of enormous personal significance for a new Member. I should like to follow the traditions, first, by being non-controversial and, second, by paying tribute to the great kindness and help that I have had from existing Members since I came to the House. They could not have been kinder or more helpful, and I, like other new Members, appreciate it.

I wish to pay sincere tribute to my predecessor, Mr. Edward Bishop. He was and is a sincere and moderate man. In office he served his country and his constituency well. He was in every respect a gentle man and was much appreciated and respected by his constituents of all political persuasions.

My constituency of Newark is in Mid-Nottinghamshire. It has its rolling acres and its beautiful countryside. I am sure that all new Members of Parliament think that their constituencies are the most beautiful. Newark has collieries and heavy industry and an expanding element of light industry. In short, it is a typical Midlands constituency. King John died there 763 years ago. But, as King John, like the rest of us, had to die somewhere, perhaps that is no matter of great moment.

What is important—and hon. Members may not know this—is that Mr. Gladstone was first elected for Newark, I think in 1832. He was of course elected as a Conservative. Whatever my political ambitions in this House may be, I always regarded his politics as slightly suspect and I have no intention of following his example.

I mentioned that in my constituency there are a number of coal mines and I have no doubt that I stand here with the support of very many members of the mining community. This was certainly the case in the constituency of Ashfield, which adjoins mine. That constituency was sensible enough at a by-election to return Mr. Tim Smith. He could have been elected only with the votes of the mining community, and I very much hope that we will see Tim Smith back in this House very soon.

The point I am making is that the mining community was concerned, as those of us on the Tory Benches are, about the size and the shape of the tax burden which until recently this country had to bear. The work of the miner is hard, dangerous and skilful and in many cases it is highly paid. The Chancellor's objective before the Budget, and I believe during and after it, was to strike a chord within the mining community. However, there is no magic formula. There is no secret of eternal life and success except to create a climate in which all people can prosper regardless of the jobs that they do.

Governments must realise that they are in existence to serve and encourage people. Their purpose is not to promote abstract theories of the Left or the Right. We must motivate the individual and not make him feel that he is part of a treadmill from which he cannot escape. I believe that it must be worth while to have as a prime motive the building up of something in one's life to hand over to one's children and successors, whether in business or in family life. There are few motives more worthy than to want to hand over something of oneself to one's children.

Hon. Members on the Opposition Benches may on occasion stigmatise the objective of acquiring something in order to pass it on as inherited wealth. It is not inherited wealth at all. It is income derived from savings which have already borne swingeing taxation.

I therefore welcome generally the proposals in the Budget, but, without wishing to travel down the path which was described in this House the other day as that of rebellion, may I point out one or two defects in the Budget? I looked for some way of encouraging the expansion of the agriculture industry. Present taxation policies bear hardly on those who want to hand over a farm. They also bear hardly on those who want to acquire a farm. It is quite unrealistic to expect any young man without private means to acquire perhaps £250,000 with which to buy his own viable farm. I believe that we should remove the obstacles, through the capital transfer tax system in particular, in the way of young men trying to get on to the farming ladder.

I welcome the proposal for war widows' pensions. I believe, however, that the position of widows generally remains unsatisfactory and that it should be re-viewed. Immediately she becomes a widow a woman is taxed as a single person and pays VAT as a single person. What is there in this Budget for the widow? I venture to suggest not a great deal, although she has responsibilities that single people do not usually have, such as children, their education, and even dependent relatives from both sides of the family. She pays a higher mortgage than most single people have to pay. I hope that her position will be reviewed urgently and soon.

I should have liked to see a mention in the Budget of the reduction of stamp duty on domestic conveyances. The figure of £15,000 at which duty becomes payable is quite unrealistic these days. A large proportion of houses cost in excess of £15,000 and the duty rises at an enormous rate. For example, if one buys a house for £31,000 the duty payable to the State is some £600. I belive that that is too much.

I hope that the Chancellor's arithmetic is correct when he says that the increases to pensioners will more than cover the new VAT requirements. It was one of the most worrying aspects of being a pensioner that VAT was likely to go up in the Budget. I have listened to the comments about the reasons for increases in pensions being delayed until November. But that delay is generally very much resented by the pensioners. They have to wait until November, although VAT and new tax burdens commence immediately. I hope that my right hon. Friend will look at this again and see whether, if he is to make an announcement, he can make it at such time as he knows exactly when he can bring it in and when he knows from his records what can be done. I belive that not to do so would be unfair and unacceptable to pensioners.

I am sure that I have spoken far too long and I shall probably not catch your eye again, Mr. Deputy Speaker, for a long time. I was advised by my family that whenever I made my maiden speech I should not on any account speak in the economic affairs debate. They tell me I know nothing about economics. [HON. MEMBERS: "Hear, hear".] I left myself wide open there, well knowing that I would do so. But whether I know nothing about what I have just been saying is for the House to judge.

I end where I began, with a tribute to this House, which quickly wraps itself around a new Member and makes him one of its own. For that, and for bringing me in and making me feel so welcome, and for sealing the bargain today, I have very much pleasure in thanking everyone concerned.

6.29 p.m.

Mr. Reg Race (Wood Green)

Thank you, Mr. Deputy Speaker, for calling me to take part in what I regard as the most important economic debate of the year.

I start my maiden speech by complimenting the hon. Member for Newark (Mr. Alexander) on the way in which he addressed the House and on the comments he made about VAT and other matters with which I am sure many of my hon. Friends on the Opposition Benches will agree.

I follow, in my constituency of Wood Green, in the London borough of Haringey, a Member who sat in this House for that constituency for 25 years, Mrs. Joyce Butler, who I believe was greatly liked on both sides of the House for the way in which she conducted herself both as a constituency Member of Parliament and as a Chairman of many of the important Standing Committees of this House. One of the important parts of my tribute to her is to say that when I was canvassing during the general election at Wood Green I did not come across a single person who was critical of Joyce Butler's record as a constituency Member. I regard that as a very good record after 25 years representing one constituency, and I know that that view will be shared by many right hon. and hon. Members.

Joyce Butler was active in the fight for consumer rights and in the fight to enable women to participate effectively in the National Health Service and to ensure that part of the National Health Service budget was given over exclusively to their needs and problems. This is an issue to which I hope to return over the next few months.

It was my wish to speak in this debate because the problems which my constituency faces are not problems related to any single employer. Wood Green does not have one large factory or a number of coal mines employing a large number of workers who live in the constituency. It depends in large part for its economic prosperity on the general economic and budgetary strategy of the Government in power. Therefore, when I speak this evening about the Budget and the global economic objectives which the Government have set themselves, I do so in the knowledge that Wood Green will be very much affected in that way.

One of the major aspects of the Budget is, of course, the plan to attack public expenditure and deliberately to transfer resources from the public to the private sector. Plainly this is a policy which will affect my constituency very badly, and in this context I mention two issues of particular concern.

First, there is concern about the continued availability of the accident and emergency facilities at our local hospitals and, in particular, at the Prince of Wales hospital in Tottenham, whose catchment area includes the whole of my constituency. That accident and emergency unit is already under threat from the area and regional health authorities, and I believe that the policies being pursued in the present Budget, with the failure to raise the cash limits for the National Health Service in line with the new pro- jections on inflation and in line with other matters, will undoubtedly affect our ability to keep that important accident and emergency facility at that hospital.

Second, my constituency will be affected if and when the public expenditure axe falls on the major sections of the road programme, for the eastern half of it suffers greatly as a result of traffic congestion on the north-south route.

For those two constituency reasons, therefore, I regard the Budget as nothing short of a disaster for working people and their families. I say that not just because of the impact of the Budget on my constituency but because of its impact on the large economic aggregates.

On Tuesday the Chancellor spoke of the rate of economic growth which he expected the United Kingdom economy to produce in the next year, and he said that it wold fall to a nil growth rate. Hon. Members on the Government Benches may care to reflect that the National Institute for Economic and Social Research predicted that growth in this financial year, in 1979–80, would be 1.6 per cent. if the policies being pursued by the Labour Government had been carried forward.

I am one of those who regarded a 1.6 per cent. rate of growth as absurdly low, and I believe that the prospects which the new Government hold out of a nil rate of growth and the 1 per cent. fall in gross domestic product which is predicted for the forthcoming 12 months present a serious problem for us all.

The Government's budgetary policy of trying to cut the rate of growth through the proposals which they have introduced, by some miraculous means transforming the British economy by having some sort of relationship between lower taxatian, higher productivity and a higher rate of economic growth in the long run, seems to me to be based on a spurious academic notion. I believe that, when the budgetary sums are completed next year, we shall see that the outcome in rate of economic growth will in the event be worse than the Government would lead us to expect.

The policy which the Government are pursuing in the public sector, and in the National Health Service in particular, is extremely misguided. It is based on a fallacy about the way in which the public and private sectors of the economy relate to one another. For example, we have had the theory enunciated from the Treasury Bench that the public sector is somehow crowding out the private sector, preventing employees from moving into the private sector and preventing investment from taking place.

I do not believe that that argument is in any way based on fact, and, in truth, neither does the Treasury, because in its evidence to the Wilson committee on the financial institutions it made clear that it believed that that kind of argument was not supported by the facts.

Moreover, we have to consider the manpower crowding-out effects. How can a home help who may be made redundant in my constituency somehow reappear as an engineering worker in Scotland or as a miner in Yorkshire? The whole thing is absurd. If manufacturing industry wants to employ more people, it can do so from the ranks of the 1.25 million unemployed who, I am sorry to say, were left as unemployed at the end of the Labour Government's term of office. That argument, therefore, on both the manpower side and the financial side, is misguided.

I believe also that the cuts in public expenditure which the Government propose will not succeed in transferring resources to the private sector in any substantial way. After all, we had major cuts in public expenditure in 1975 and 1976, on four separate occasions, and the amount of resources diverted from the public sector into private sector manufacturing investment was only 25 per cent. of the total amount of cuts which were made by the Government at that time. So I do not believe that that policy will be successful.

One of the important points raised in debate today is the question of the cash limits for the National Health Service. In his Budget we had from the Chancellor a statement to the effect that he did not want to reduce the amount of resources which the NHS could command. Today the Secretary of State referred to the cash limits for the NHS and said that they will be reduced in the same way as the Labour Government had intended. Hon. Members may be interested to know precisely what that was. I quote from a letter which was sent to administrators of regional health authorities on 11 April 1979: Health authorities will accordingly be expected to plan their expenditure in 1979–80 on the following basis. No adjustment will be made to cash limits for a higher level of price inflation than that for which provision is already included. Cash limits will however be adjusted in full for the excess cost of current and future pay settlements approved by the Government, except that, in accordance with the Chief Secretary's statement, the NHS in Great Britain will be required to absorb a proportion of the cost, assessed at £22 million at Survey 1978 prices. That means that the implementation of the Clegg report on the claim for ancillary staff and for ambulance men in the National Health Service, when it comes out on 1 August, will be cut back by £22 million by this Government. I hope that the Secretary of State will reconsider his policy on that matter, since it will undoubtedly lead to cuts in services and cuts in jobs in the present financial year in a way which the Chancellor of the Exchequer said that his party was not committed to. I should like the Treasury Bench to confirm precisely what its policy is on that important matter.

I turn to the effect of the Budget on collective bargaining. One of the most important points that those in the Government have been stressing over the past few months is the importance of achieving responsible collective bargaining in the private sector while retaining controls over public sector pay. The mix that has been put forward in the Budget is one that will cause serious industrial unrest among National Health Service employees over the next few months. I should not like to predict the extent to which the unrest will manifest itself.

In October 1978 fulltime male ancillary staff were receiving 75.8 per cent. of the average male manual worker's earnings. The Budget, which increases VAT, will give them a very small increase in their take-home pay because of the tax changes. If there are tight cash limits, the low pay of those workers—the ancillary workers, nurses, and ambulance workers—will be maintained for ever.

I do not support that policy. The Government should be generous in not only the implementation of the Clegg inquiry findings but in their negotiations with the relevant trade unions when they discuss these matters in the December pay settlement talks, and thereafter in following pay rounds.

The policies that the Government are introducing are likely to strain relationships between workers and employers in the National Health Service, and between workers and Government in the National Health Service, as well as being irrelevant to the problems that we face as an economy and as a nation.

We should go for a much higher rate of economic growth. We should go for a planned economy. We should go for planning agreements of the sort that should have been implemented over the past five years. That sort of budgetary policy and economic analysis would do low-paid workers in the National Health Service and the public sector a great deal of good. The Government's proposals to shift resources from the public to the private sector will rapidly be shown to be fallacious and not proven.

I hope that the Government will reconsider completely their budgetary policy. I know that that is a vain hope, but I believe that the prospect being held out before us is one of much higher unemployment and an attack on the social wage that will affect the living standards of ordinary working people. That should be resisted as far as is possible by the Labour movement both in and outside Parliament.

6.44 p.m.

Mr. John Lee (Nelson and Colne)

I pay tribute to the eloquence and strength of argument in the maiden speech of the hon. Member for Wood Green (Mr. Race).

With the aid of the House's most efficient Library service, I have been able to study the maiden speeches made by my three predecessors.

In 1935 the late Sydney Silverman made his maiden speech on Socialism, capitalism and unemployment. He spoke for 24 minutes. In 1968 a former Member for Nelson and Colne, my hon. and learned Friend the Member for Clitheroe (Mr. Waddington), spoke for 10 minutes, primarily on housing. I thank my hon. and learned Friend for all his help and guidance. In 1974 Mr. Doug Hoyle spoke for 11 minutes, mainly on the Common Market referendum.

Although I may attempt to emulate the eloquence of my three predecessors, I assure the House that in appreciation of being given the opportunity to address the House my speech will be much closer in length to the latter two rather than the first. Many hon. Members will remember the numerous efforts and achievements of previous Members on behalf of my North-East Lancashire constituency. Above all, they will recall the innate kindness and humanity of my three predecessors.

I am proud that constituencies such as Nelson and Colne personify all that is best in the United Kingdom and its people. My constituency has witnessed a traumatic change in its traditional labour-intensive textile industry. It grew around the original textile mills which have become synonymous with the industrial North of bygone times.

In those days over 90 per cent. of employees worked in the textile industry from an early age. They worked for long hours for limited pay in primitive conditions. Those years of toil are clearly etched on the brows and bodies of so many elderly inhabitants. As one walks on cobbled streets it is easy to visualise the clogged feet hurrying to work in the early hours of the morning.

From that background has come a determination of self-reliance and independence which manifests itself in an owner-occupancy level of over 70 per cent. and a tremendous vitality of community spirit and neighbourliness. Today following the decline in textiles, employment in the industry is down to slightly over 20 per cent. of the work force. They are employed predominantly in sub-sidiaries of national and multinational groups or in highly specialised companies.

I pay tribute to the massive capital investment programme undertaken by textile managements, to the moderation and co-operation demonstrated by the unions and to the contributions of previous Governments. The problems of dumping and foreign competition still beset us, although the multi-fibre arrangement brought a measure of relief. Today a new weaving machine can cost up to £35,000. To re-equip a whole plant would cost £4 million to £5 million. Companies will not invest that sort of money unless they see a permanent future market for their products. That is why a commitment to continue with the multi-fibre arrangement well into the 1980s is vital.

Nelson and Colne has now broadened its industrial base. It has become a major centre for furniture manufacture, packaging and specialised engineering. Major aerospace companies such as Rolls-Royce and Lucas are just beyond its borders, and it gains much prosperity from them and their sub-contractors.

By and large, labour relations are good. It seems to be accepted that there is an optimum size for a manufacturing plant, beyond which relationships and communications fall away. Regrettably, many companies are experiencing a shortage of skilled labour. It is depressing to walk round factory floors and see so much new machinery and equipment imported from abroad. What has become of our machinery manufacturing capabilities?

Like so much of the country, Nelson and Colne looks to its small businesses to provide employment and wealth for future generations. My constituency has absorbed a sizeable minority community, and many are now entrepreneurs in their own right. I am happy to say that it has been accomplished with more tolerance and understanding than perhaps has been shown elsewhere. For the most part community relations are good. We are fortunate that just beyond our industrial heart lies some of the most beautiful country in northern England. It is shared by the locals with many visitors and tourists from afar.

I make my maiden speech during a historic Budget debate. I pay tribute to my right hon. and learned Friend the Chancellor of the Exchequer for a courageous and radical Budget which marks a determination to change the economic tide and direction of the country. It was Colbert who said: The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least amount of hissing. For the past few years my wealth creators, our skilled and semi-skilled workers, professional managers and business men have paid an awful lot of tax and done an awful lot of hissing. Until this Budget, Governments have tried all forms of grants, subsidies and allowances to increase productivity and wealth. At last we are trying to motivate the individual by significant tax cuts and by rewarding effort, risk-taking and responsibility.

Our great trading companies of old were not created by Price Commissions, Manpower Services Commissions, comparability boards or planning agreements. They were built by individuals of resource endeavour and courage.

If one stands back and considers Britain's economic history, one sees that our business backbone was, and to an extent still is, the family business. Governments have rightly given varying degrees of encouragement to these companies. Although many have been outstandingly successful and grown into industrial giants, for too many success has not come. The problem is that too often it has been a matter of complete chance whether the generation who inherited the family business had any interest or ability in it. Hence the clogs-to-clogs syndrome, perhaps bankruptcy for the family, and redundancy or limited security of employment for the work force.

Family companies must realise that, in return for taxation and other advantages, they have a responsibility to the nation, a responsibility to augument family control and direction by promotion from within or by the transfusion of management talent from outside. If a member of a family is not up to his task, he should be supported in other activities or given a job in the firm, but he should not be involved in the boardroom or the decision-making process.

We approach the remaining 20 years of this century from a base of low productivity and historically high unemployment. Our larger manufacturing companies, striving to compete in world markets in an era of increasing automation and silicon chips, will almost certainly be net shedders of labour. This will be compounded by a continuing decline in the job requirements of our traditional major employing industries such as shipbuilding, steelmaking and heavy engineering.

We all recognise that new industries will arise as consumer and market demands change. It is accepted that it is to our small business sector, set free from the inhibiting bonds of legislative, bureaucratic and taxation excesses, that we shall look for new job opportunities, especially for our young people. However, the question must be posed: will this be enough? Perhaps the time has come to think about the unthinkable and to face the fact that as we move towards the twenty-first century employment opportunities, especially for the unskilled, may be just a mirage and may not exist in the traditional sense.

I do not accept that the long-term answer lies in creating artificial jobs or in swelling the ranks of the already excessive public sector. Nor does it lie in overmanning or the nonsense of interunion demarcation lines. The late Sydney Silverman said in his 1935 speech: I have heard many speakers inside and outside this House talk about the tragedy of unemployment, the disease of unemployment and how we can cure unemployment. I do not regard unemployment as a disease, I do not want to cure it. I want to see more and more unemployment."—[Official Report, 11 December 1935; Vol. 307, c. 1024.] Those are strange words, but what Mr. Silverman was getting at was that the achievements of technology and the march of civilisation inexorably produce this form of labour surplus and that when it comes it should provide earlier retirement, greater leisure opportunities and a better quality of life for our people than perhaps existed hitherto. Perhaps non-employment rather than unemployment would be a more apposite description.

To provide for our non-employed and properly to care for the sick, the needy and the disabled in our society, our wealth-creating private sector has an even greater and more vital role to play. Only in profitable industry are permanent real wealth created and new employment opportunities generated. That is why I welcome the chance of making my maiden contribution, in this historic Budget debate, in support of the measures outlined by my right hon. and learned Friend the Chancellor of the Exchequer.

6.54 p.m.

Mr. David Marshall (Glasgow, Shettleston)

I am most grateful to you, Mr. Deputy Speaker, for allowing me the opportunity of making my maiden speech today.

I congratulate the hon. Member for Nelson and Colne (Mr. Lee) on his most interesting maiden speech, which I am sure will be the first of many that he will make in the House.

It is a great honour for me to represent the people of Glasgow, Shettleston in the House. In so doing I am conscious of the great men and women Members of Parliament who have preceded me.

It is always difficult to follow in the footsteps of illustrious Members of Parliament. I follow Sir Myer Galpern, your immediate predecessor, Mr. Deputy Speaker, who, in his distinguished career, served the people of Shettleston for 48 years, 28 as a local councillor and for the past 20 as their Member of Parliament. He also held the highest public office of the city of Glasgow—that of Lord Provost.

In this House, Sir Myer served as one of its bestloved Deputy Speakers. I am informed that he was extremely impartial—especially towards hon. Members who disagreed with his point of view. He held the affection and support of people in Shettleston, in Glasgow, and in this House—all of whom he loved and for whom he worked extremely hard. I am sure that the House will be as delighted as I am that this week he has been made a life peer and that he will continue to serve his people in the other place. His wisdom and integrity will always be of value, and I, for one, shall be glad of his counsel.

Shettleston is a politically renowned constituency, having had only three Members of Parliament in the past 50 years. The first was John Wheatley, who was the father of the plan to have local authority housing, which gave working people their first chance of a decent home for themselves and their families. He also became an outstanding Minister of Health. The next Member of Parliament for the constituency was John McGovern, who was closely involved in the struggles of the 1930s. The next Member of Parliament was Sir Myer Galpern. They are all famous men in the great tradition of Clydeside. It is in that tradition of service to the people that I hope to follow.

Shettleston is one of the workshops of Glasgow, situated in the east end of the city, bounded on one side by the river Clyde, and containing the districts of Carntyne, Camlachie, Tollcross and Parkhead, as well as Shettleston. The major sources of employment are manufacturing industries in general, food and drink industries, engineering and public services. Unlike some of my hon. Friends who, in their maiden speeches, extolled the virtues of their local refreshment, my constituency does not possess a distillery. However, we are the home of Scotland's other national drink—according to the advertising slogan—which is Barr's Iron Brew.

My constituency is the workshop of Glasgow. Its families contain a high proportion of people of Highland and Irish extraction. Those families have one major aim—to have their children educated and to find good jobs. It is no accident that some of the top doctors, educationists, lawyers and skilled workmen in Scotland and beyond were brought up in Shettleston. It is one of the great tragedies of the so-called never-had-it-so-good era that the only place where this talent could be utilised was elsewhere, and even abroad.

I must mention one of Shettleston's notable firsts. On the first occasion ever that the European champion soccer trophy came to Great Britain—in 1967—it was won by Glasgow Celtic. It rested at Parkhead stadium. If I may be permitted to make a forecast, it will return there next year when Celtic take it away from Nottingham Forest.

I come to this House as a Transport and General Workers' Union-sponsored Member of Parliament and a former shop steward in Glasgow transport. I come also as the chairman of the Strathclyde regional council's manpower committee, which deals with matters affecting more than 112,000 employees, making it one of the largest employers in Britain. In addition, I am the chairman of the Convention of Scottish Local Authorities manpower committee, chairman of the employers' side of the National Joint Councils (Scottish Councils) for local authorities, and a member of the local authorities conditions of service advisory board. I am in the process of relinquishing those posts. However, I make the point that I have had experience of both sides of industrial relations.

I cannot accept that the Budget is anything other than a deliberate attack on the working class of this country. The effect, for instance, on Strathclyde regional council could be either approximately 4,000 redundancies or the loss of 4,000 job opportunities in an area of high unemployment.

The prospect of cancelling the dispersal of Civil Service jobs to Glasgow fills me with horror. Glasgow desperately needs these jobs. I ask the Government, in the name of decency and humanity, not to stop these jobs coming to Glasgow. At least the Government should give us something to which we might look forward.

Many small businesses and shopkeepers will be forced out of business by the Budget because people will not be able to afford their goods. The most vulnerable members of society face a miserable existence. How will they pay for the increased costs of coal, electricity, rent, rates, transport, clothes and food?

The trade union and Labour movement will not stand by and allow that to happen. I was speaking at a meeting of the Transport and General Workers Union shop stewards in Glasgow last Saturday. I am in no doubt. Glasgow will organise and fight for what it needs and deserves.

I return to another notable first in Shettleston—one which is crucial to the future of the area, and which has had considerable influence on similar inner city areas in Great Britain. I refer to the creation in May 1976 of the Glasgow eastern area renewal project—or GEAR as it is known—which covers my constituency and that of my hon. Friend the Member for Glasgow, Central (Mr. McMillan).

GEAR was the first project of its kind in Britain and the blueprint for the English partnership areas which were established following the previous Labour Government's White Paper on the policy for the inner cities which was published in June 1977.

GEAR as a concept was a bold step forward to regenerate Glasgow's east end not just economically but socially and environmentally. Post-war experience has shown that it is a waste of time just building houses. What is needed is a concerted multi-disciplined effort which takes an area and rebuilds a community in all its aspects.

It is a matter of great sadness that such a project should ever have been needed in an area whose products were sold throughout the world but which did not see in investment terms any return on the efforts of these working people. Shettleston, and places like it, were what made Britain great, and the GEAR project was not any grand gesture of goodness on the part of central Government. It was merely paying back what was due a long time ago to an area which had seen its efforts rewarded with reinvestment elsewhere—especially in the South-East of England.

If GEAR is anything, it is simply giving a damn about neglect in an area whose traditional industries have fallen into decline, whose young and skilled have moved out—encouraged by the Toothill new towns growth policy—to East Kilbride and Cumbernauld. It left decaying tenements where private landlords would not do even the most essential of repairs. It left a scandalous lack of amenities for young and old alike—no cinemas, no sports centres, and school buildings more than 100 years old. In short, it was an area where all the miseries associated with urban decay and blight were about to take over.

Between 1971 and 1975, 5,500 jobs were lost—a drop of 11½ per cent., and four times the average for Glasgow as a whole. Male unemployment in one area, Camlachie, stands at 28 per cent., according to one recent survey.

Despite this, the GEAR area still provides more than 40,000 jobs, or 10 per cent. of the total for Glasgow, with only 5 per cent. of the city's population. It contains the largest concentration of jobs outside the city centre, but unfortunately a very large proportion of these jobs are taken up by people from outwith the area. Hence the need for special action, and hence the need for GEAR.

GEAR is £187 million worth of action in a concerted effort between 1977 and 1982—under the aegis of the Scottish Development Agency—from Strathclyde regional council, Glasgow district council, the Scottish Special Housing Association, the Housing Corporation and the Greater Glasgow health board.

It is not just investment in monetary terms but investment in people's futures, where real action is taking place—not just talking. It means rehabilitation, new factories, parks and amenities, and new houses. Families who had moved out of the area are trying to return. Also quite significant is the fact that the chief constable of Strathclyde has noted a decrease in crime in the area. It shows that a response from the community is available if it is seen that we care about it and its future. Where there may have been despair there is now hope and interest. I congratulate the SDA and the other participants on the good work done in the area. Long may it continue.

However, of the £187 million estimated, only £35 million had been spent as at March 1979, leaving £152 million due to be spent over the next three years. The project is only just starting to take off, if the Government do not prevent it. The people of Shettleston feared the return of a Conservative Government. They feared that the prospects of promised cuts in public spending would destroy their dream of the much promised and long-overdue better future.

I give one example. One of the top schools in the area, Eastbank academy, was built in the nineteenth century. It is one of the schools I mentioned which provided some of the most eminent men in many professions throughout the world. Indeed, if some of the Victorian pioneers came back, they would find the place virtually unchanged. It is one of the most deprived secondary schools in Strathclyde, where there is only shelter space in the yard on wet days for 40 pupils out of 870, where the outside toilets are almost unusable, where there is no hall for the whole school to gather in, where there is no staff room as such, and where desks and furnishings are used which are more than 20 years out of date. There is only one interval per day because of these conditions.

A replacement school was first planned in 1933, then in the 1950s, and again in the 1960s, and it is finally due to start as part of the GEAR project. But will it, or will it be a victim of cuts yet again? Surely not. This school must be rebuilt now.

The contents of the Budget will not allay the fears of the people of my constituency. They will only add to them.

The electors of Shettleston have placed their confidence and trust in me. It is no part of my duty to my constituents to stand by while their dream is shattered. It is no part of my duty to my constituents to stand by while positive discrimination is made against areas of greatest need. It is no part of my duty to my constituents to stand by and allow a state of affairs to continue in which Victorian buildings are used to educate children. It is my appeal to the Government that GEAR should be specifically exempted from cuts. This is the very least that can be done to compensate for years of neglect.

We recently had a much publicised quotation from St. Francis. One wonders what his view would have been of a Budget which took from the needy to give to the greedy and which made the rich richer and the poor poorer.

7.5 p.m.

Mr. Robert Atkins (Preston, North)

In rising to address the House for the first time, Mr. Deputy Speaker, I congratulate the hon. Member for Glasgow, Shettleston (Mr. Marshall) on his maiden speech. I hope that in due course we shall cross swords in as polite and articulate a fashion as that in which he has made his speech this evening.

I should like to add to the thanks which have already been given by hon. Members on each side of the House to all those in the House who have helped me so much since I became a Member. I should also like to crave the traditional indulgence of the House to a Member on his feet for the first time, but I do so with mixed feelings, Mr. Deputy Speaker, because I learned my politics in the rough and tumble of open air speaking in Hornsey, under the watchful eye of my hon. Friend the Minister of State, Northern Ireland Office. I must confess that I am more daunted by a silent—or even non-existent—foe than I am by the occasional polite and reasoned contribution such as that commonly found at Hyde Park Corner.

It is also something of an anniversary for me, in that an ancestor of mine, Sir Robert Atkins, became the Member for Gloucestershire exactly 300 years ago, only, I am sorry to say, to lose his seat on 12 July of that same year—an event that I would not wish to see repeated.

As hon. Members will be aware, I am the Member with the smallest majority in this House. I am all the more awed by the fact that my friend the hon. and learned Member for South Fylde (Mr. Gardner) has the largest majority in the land.

It is a convention of this House—and rightly so—that I should speak of my predecessor and his contribution to Parliament and to his constituency, but in so doing I cannot forbear first to mention my right hon. Friend the Member for Brighton, Pavilion (Mr. Amery), who presided over an even smaller majority in 1964, of but 14. I was warned, upon becoming the Conservative candidate for Preston, North, that a certain convent in the constituency, numbering some 14 members at that time, had been given permission by the Pope to vote for the first time in that election. The figures, of course, spoke for themselves, and hon. Members will not be surprised to learn that I paid court to them with due deference. The result is plain for all to see.

My immediate predecessor, Ron Atkins, was a Member of this House for nine years, during which time he was an excellent constituency Member, perhaps as a result of his knowledgeable membership of Preston borough council. His reputation in this regard was one of the most daunting parts of his armoury during the campaign. If I am able to emulate his level of activity on behalf of constituents, I shall have done very well indeed. He was known in the House for his chairmanship of his party's Back-Bench transport committee and also for his joint sponsorship, with the hon. and learned Member for Leicester, West (Mr. Janner), of the petition for the retirement of men at 60—evidence of his concern for and interest in the wellbeing of older members of society. I wish him well in his enforced retirement from this House.

My constituency is half of the town which refers to itself as proud Preston—with good reason, for it has much of which to be proud, this year especially, for it is the 800th anniversary of the first charter, granted by Henry II in 1179. The celebration was graced only last month by the presence of Her Majesty the Queen. This makes Preston arguably the oldest—and certainly the second oldest—guild borough in England.

Preston, North covers a part of the former county borough of Preston and the whole of the former urban district of Fulwood. It includes within its boundaries the site of the Battle of Preston during the second Civil War in 1648. It also includes Preston prison—whose enforced inmates cannot—like the members of the convent, subscribe to my majority—and Fulwood barracks, the headquarters of the North-West district of the Army. May I say now, Mr. Deputy Speaker, how much the Army appreciated an entirely deserved and much overdue pay increase?

Perhaps the most important attraction to many Prestonians—and the scene of Tom Finney's many triumphs—is Preston North End football club, promoted last year from division III to division II, seventh in that division, and destined, I am sure, for division I as soon as possible.

In a more serious vein, I wish to say that many of my constituents work for British Aerospace, the military aircraft division of which is situated in three locations around Preston, famous for the Canberra, the ill-fated TSR2 and, latterly, the Jaguar and the Tornado, whose delivery is urgently awaited by the Royal Air Force. How good it was last week to see the first aircraft roll off the production line. One also noted the £1,500 million deal clinched in Paris the other day for a further 164 Tornado aircraft for the German, Italian and our own air forces—providing jobs as well as the defence of our freedom.

I wish to say how saddened I and, I am sure, many other hon. Members are by the loss of the prototype aircraft yesterday, and paticularly the lives of the pilot and navigator. No words of mine can truly express the admiration and appreciation that I have for the bravery of these men who testfly aircraft, both civilian and military. Their deaths are a tragedy, and I wish to express my sympathy to relatives, and to colleagues in BAC and in the RAF. I have complete faith in the people who designed and manufactured this aircraft, and I am sure that the problem that may have caused this crash will not prove to be insuperable.

On the subject of defence, I wish to press Her Majesty's Government to bring same continuity into defence planning rather than the fits and starts which have so dominated it in recent years. For example, I want an early decision on the next aircraft in the front line, the so-called AST403.

Finally, in the context of BAC, I wish to remind the House of the 2,000-plus shop floor workers in the Preston factories who signed the petition against the nationalisation of the aircraft industry. I support the Government's policy of returning some of the share capital to the hands of the work force and the general public. But, in view of the sensitive nature of the industry, I ask the Government to proceed with care in the implementation of such plans.

The other large employer in my constituency is Courtaulds, in which work many Prestonians of Asian background. I am glad that Her Majesty's Government are supporting, as the Conservatives did in opposition, the multi-fibre arrangement, which is so important to our textile industry, especially since so many of the Asians in Courtaulds work very hard to save money to become small business men on their own account. The loss of their jobs or reduction in their earning power would have far-reaching effects on the future advancement of the free-enterprise and self-sufficiency ethic so crucial to the development of our society—a fact recognised so well by my right hon. and learned Friend the Chancellor of the Exchequer in his Budget—and especially important to the Asian community who contribute so much to our life and culture in Preston.

I wish briefly to refer to the Central Lancashire new town. This is a continuing source of both hope and concern to many of my constituents. There is hope because of the much-needed cash which is being injected into the regeneration and rehabilitation of the older terraced areas of the town, and also the new jobs that will follow the industrial redevelopment. The concern relates to the older house owners about the future of their own, often much-loved, homes and particularly in the more rural area to the north and east of the constituency, at the building of distributor roads and factories on green field sites—a state of affairs to which I am wholly opposed.

Preston is a town in the centre of Lancashire in the geographical and administrative sense. It can, I am so informed, even be found in the new AA book of towns if one looks hard enough. It has the good fortune to be controlled by a Conservative council which has reduced the rate burden from the highest in the country to the lowest in just three years. This is the evidence that the people of Preston saw of Tory policies in action—enough to attract a majority of them to the Tory Party in Preston, and indeed to the country, on 3 May.

As a cross-section of the nation in the wide variety of their origins, creeds and talents, their collective view is representative of the country as a whole. They welcome this Budget, incorporating as it does so many of the policies for which they voted in May, and believe, as I do, that it represents a major step in the direction of incentive, reward for industry and encouragement for those who want to do well both for Britain and in Britain.

7.15 p.m.

Mr. Roland Moyle (Lewisham, East)

It gives me considerable pleasure to congratulate the hon. Member for Preston, North (Mr. Atkins) on his maiden speech. It is a pleasure which is enhanced by the fact that, in the 13 years that I have been a Member of this House, this is the first time I have had the occasion to follow the remarks of a maiden speaker. Therefore, I offer him my warm congratulations.

I applaud the way in which the hon. Member thanked all those in the House who so far have helped him to find his feet. Those comments were very much appreciated by us all. I am sure that the hon. Gentleman will have no difficulty in learning that in this House he can deliver hard blows in debate and at the same time express himself with courtesy.

If there is a slight shadow over the hon. Gentleman, it is that Mr. Ronald Atkins, whom he replaced, has established a reputation of returning to represent Preston, North, having departed from this House on other occasions.

The Chair has seen fit—and I am sure that the House supports the Chair in that view—to call a large number of maiden speakers to address the House in this debate. As I am the first long-serving Member to speak for a considerable time, and as maiden speakers have been congratulating each other on their performances, I am sure that their words were sincerely meant, but I must point out that their yardsticks are not yet fully developed. On behalf of the long-serving Members of the House I take this opportunity of thanking the maiden speakers for having participated in this debate. I have been tremendously impressed by the fluency of contributions by maiden speakers, by the clarity of delivery, and by the knowledge of constituencies which they seem to have built up in the last few weeks.

I apologise for missing the speeches of the hon. Member for Newark (Mr. Alexander) and my hon. Friend the Member for Birkenhead (Mr. Field), but I heard the speeches of the hon. Members for Nelson and Colne (Mr. Lee) and for Belper (Mrs. Faith), and that of the hon. Member for Glasgow, Shettleston (Mr. Marshall). I was in Nelson and Colne when the date of the general election was announced. I have also visited the Belper constituency. When I visited the Pastures mental hospital I formed the view that violent mental patients should not be confined to ordinary mental hospitals and that there was a case for regional secure units. I hope that the efforts that I made before the general election to ensure that those units are re-established will be carried on by my successor.

We appreciated the reference by the hon. Member for Shettleston to Sir Myer Galpern—to whom I suppose one should now refer to as Lord Galpern—the hon. Gentleman's predecessor, who in many ways was a model occupant of the Chair. He had an ability to induce brevity, coupled with a sense of humour and a firm grasp of the procedure of the House. He will be warmly remembered by us all.

I do not wish to detain the House for longer than I can help, and I wish immediately to turn to the subject of the Budget. We have had a classic Conservative Budget. There has been a great deal of talk in the House in the last day or two about new departures, but in my view this is a return to an old approach. It has been tried several times in the course of my political life, by the late Selwyn Lloyd, by Lord Barber and now by the present Chancellor of the Exchequer. In the long run such an approach has always had an adverse effect on the nation's affairs. It means that the honeymoon period of this Government is over, because the Budget is based on principles which I regard as diametrically opposed to those required for the good government of the country. The Conservatives may have been electorally victorious, but I regard this Budget as having been produced by the intellectually tired. The only new thing about the Budget is the somewhat incontinent vigour with which the remedy is being pursued. That has its own risks.

I wish to refer to two aspects of the National Health Service for which I was responsible for the last two and a half years before the general election. I am a member of the National Union of Public Employees, which, of course, organises in the National Health Service. From that viewpoint I welcome the contribution of my hon. Friend the Member for Wood Green (Mr. Race), who belongs to the same union. I am sure that he will make considerable and expert contributions to future debates. His maiden speech indicated that he was capable of doing just that.

I should like to ask the House to explore with me the psychology of members of trade unions against the back-ground of the Budget. Let us take the case of a member of NUPE whose take-home pay is about £60 per week. There are a great number of members of NUPE who earn somewhat less than that amount. I do not believe that such persons are seeking industrial unrest or confrontation with the Government. We did have a winter of discontent, and there were many who felt militant and aggrieved as a result of the pressure of the cost of living on their status in society. They compared themselves unfavourably with those in the private sector of the economy. The experience of last winter has, in many cases, exhausted their capacity or desire for militancy—as it has that of members of the Government, the Opposition, Health Service management and everybody involved. I do not believe that the average NUPE member is looking for a re-run of last winter's events.

How will those who take home £60 per week cope with the rise in the cost of living that is being forecast by the right hon. Gentleman? It will be a massive problem for them—an increase of 17½ per cent. Once there is an increase of that sort, founded on an increase in VAT of 4 per cent. or 5 per cent., there will be a snowball effect. My right hon. Friend the Member for Salford, West (Mr. Orme) was right when he said that increases in the cost of living might well go beyond 17½ per cent.

Against that background, the Chancellor's recipe is that there should be responsible bargaining and that we should not press to protect ourselves against the cost of living because he has not increased VAT on necessities such as food and children's clothes. If an increase in the cost of living of the proportions about which the Government are talking is injected into the economy there is no way in which essentials like food, children's clothes, gas and electricity can be insulated from the inflationary consequences of that sort of injection.

An income of £60 per week is already stretched to meet the current cost of living. Huge increases will arise during the remaining six months of this year, starting on Sunday with the 4 per cent. increase resulting from VAT. No matter how unmilitant and desirous of avoiding industrial troubles the average member of NUPE may be, I believe that, as the cost of living climbs from 12½ per cent. to 17½ per cent.—possibly to 20 per cent.—he will have no margin to meet that, and the pressure on the union to do something about it will increase and increase.

The responsibility for that will rest entirely with the right hon. and learned Gentleman and his right hon. Friends who have supported and introduced the Budget. That is something which they have to face. Sometimes it is suggested that the problem can be solved by introducing a wage freeze. In a peculiar way, a wage freeze has its own brutal fairness—everybody gets nothing and stays in the same relationship to one another. It has been tried in the past—and it has worked—but it has always been tried and worked against a background rise in the cost of living of 3 per cent., 4 per cent. or 5 per cent. a year. There is no way in which such an instrument could be used successfully to solve the problems of a 17½ per cent. or 20 per cent. increase in the cost of living in the course of a few months.

Mr. Nick Budgen (Wolverhampton, South-West)

The right hon. Gentleman is denying the basic argument of the previous Administration—that they solve a 29 per cent. rate of inflation as a result of a wage freeze.

Mr. Moyle

We did not solve anything as a result of a wage freeze. We had an agreement with the TUC over a long period that it would moderate its wage claims in return for Government policies aimed at moderating the increases in the rise of the cost of living. If the hon. Gentleman believes that there was a wage freeze, I do not know where he has been for the past few years.

If a wage freeze backed by statutory consequences, is introduced by the right hon. and learned Gentleman, I believe that the consequence will be an increase in disrespect for the law. Indeed, the Chancellor was primarily responsible for that when he was last in government, with the introduction of the Industrial Relations Act 1971. That probably did more harm to the respect in which the rule of law is held than anything done by any politician in this country since the Second World War. I plead with the right hon. and learned Gentleman not to repeat his folly of that time.

I wish to conclude my speech not on that subject but with what might appear to be a more humanitarian aspect of the Budget—the announcement by the Chancellor that the cash limits imposed on the Health Service would be maintained at the level which we set. At this stage I was going to give a mild pat on the back to the Secretary of State for Social Services for his limited success in his battle with the Treasury, but I am afraid that during the course of the debate so far I have detected a complacency on his part which I believe he will rue as the months and years go by.

The Secretary of State may feel that he has won some sort of a victory. He may feel that conceding prescription charges—unforgivable from our point of view—is something well worth the triumph that he has obtained. He has been prepared to sack a number of ancillary workers or to remove their jobs and those of Health Service administrators, and he may feel that he is able to get the Health Service through unscathed, but I have to warn him. I believe that the National Health Service might well already have suffered irreparable damage because of the Government. It may well be that his right hon. Friend the Secretary of State for the Environment has sold the pass, because the rate support grant will be cut by £300 million.

There is now a close relationship between the National Health Service and the social service departments of local authorities. The two go hand in hand. At one stage, when I was a fairly new Minister of State with responsibility for the Health Service, I went so far—in the presence of the chairmen and directors of social services committees—as to describe the social services departments as another arm of the Health Service. As a result my ears were soundly boxed verbally.

However, there is now a close relationship between the social services departments and the NHS because, as the acute and traumatic problems of human health are more and more solved—or the solutions to the problems speeded up—care is concentrated essentially on a hard core of people for whom hospital treatment is not suitable. I am referring to the care of the mentally ill, the handicapped, the aged and children, who often have to be palliated rather than cured. They are not suitable for hospital treatment. They are looked after with continuing care, mostly by social service departments.

The problem is particularly acute among the elderly. The number of those over 65 in this country increased by 20 per cent. between 1966 and 1976, and the number of those over 75 will have increased by about 24 per cent. by 1984—about the time that this Parliament will be drawing to an end if its normal span is run. Those are huge increases, and those people must be looked after substantially by social service departments.

The increase in the number of elderly means an increase in the number of elderly lonely, and they can receive only social service department support. One-half of current social services expenditure is on the elderly. It is not just a question of geriatric care, either. The elderly fall ill more often, in the generally accepted sense, and get taken into hospital. Though they may be cured, they like to return home, and if they can be returned as quickly as possible that is the answer to the problem.

However, the number of home helps will be cut if the rate support grant is cut. Meals on wheels services will be attenuated, there will be cutbacks in the planned provision of day centres and existing day centres will have fewer professional people to care for the elderly who use them. More and more of the elderly will remain in hospital beds for longer and longer. The Health Service will gradually choke if the Government's policies are followed.

Geriatric care is also involved. The average stay of geriatric patients in hospital is about six weeks. The object is to return them to the community where they can practise their new physical and drug therapies on a daycare basis in hospitals or day centres. Of course the pressure for long-term care of geriatrics in hospital, as opposed to day care in the community, will increase as social service departments of local authorities come under pressure.

The previous Government were hoping to return about 15,000 adult mentally handicapped patients and 3,000 children to the community by 1991. That policy is at risk with burdens being put on the Health Service as a result of reductions in the rate support grant.

It is easy for Ministers to avoid a tactical defeat on that argument by saying that it is up to local authorities to decide where to make the cuts and that if they choose to cut social services, that is their business. I noticed that the Chief Secretary to the Treasury adopted that approach yesterday, but Ministers in charge of the NHS wil find that the Service will come under ever-increasing and powerful pressure over the years during which they are responsible for it.

I believe that community support for the NHS will be eroded gradually, but ruthlessly, over the next four or five years, so that by 1984 there will, compared with present pressures, be massive pressures on the National Health Service which it is unlikely to be able to sustain.

The pathetic sums derived from increased prescription charges will be of no help to the solution of the problem. It may be that Conservative Members believe that there will be a large influx of private funds which they can attach to the Health Service to help to solve the problem. But even in the United States, a rich country dedicated to private funds in the delivery of health care, such funds have not been available in any substantial measure for the care of the elderly, the mentally ill and the mentally handicapped.

Even the right hon. Member for Leeds, North-East (Sir K. Joseph) had to concede that however much he cut back the NHS and its burden on public funds he could never find a solution, other than a publicly funded solution, for those categories. If the Government are hoping for aid from the private sector, I believe that they are doomed to failure.

On all sides of the political argument the National Health Service is a beloved institution, and I do not believe that the British people would forgive anyone who destroyed it. The Secretary of State for Social Services must stiffen the Secretary of State for the Environment in his battles with the Treasury, because Treasury Ministers know that they have a sucker in the Secretary of State for the Environment. He must be stiffened in future battles by the Secretary of State for Social Services. Otherwise, the right hon. Member for Wanstead and Woodford (Mr. Jenkin) will go down in history as the man who destroyed the National Health Service beyond repair.

7.36 p.m.

Mr. James Kilfedder (Down, North)

The right hon. Member for Lewisham, East (Mr. Moyle) was a hardworking Minister in the Northern Ireland Office for a number of years, and I am sure that he will understand if I concentrate solely on Northern Ireland. I make no apology for looking at the Budget in terms of the effect that it will have on Ulster people and on industry and agriculture in Northern Ireland.

So often, Budgets seem to be geared to the problems of England and particularly the Midlands and the South-East. I am sure that the officials in the Treasury and elsewhere who do all the wide-ranging and careful calculations to see what will be the effect of an increase in petrol tax or VAT do a thorough job, but unfortunately their statistics are pitched on averages which do not tell the whole story for the whole nation.

For example, the opportunities for employment in the London area are three and a half times the opportunities in Northern Ireland. In the Province, 38 per cent. of all employees are employed directly or indirectly through Government activity of some sort. More than 25 per cent.—about 110,000 people—are directly employed by the Government or grant-supported bodies.

That is in stark contrast with London, where fewer than 20 per cent. of employees work in Government or allied services. Clearly, therefore, the impact of a cut in Government expenditure will be different in Northern Ireland from the effect in the South East of England.

The same may be said about the North of Scotland and parts of northern England, but because separate records are kept in Northern Ireland, the differential impact can be seen more clearly and of course the standard of living is far lower in the Province than elsewhere in the United Kingdom.

According to the Chancellor of the Exchequer, Northern Ireland expenditure is to be cut by £35 million. That is to be Ulster's contribution to the nation's total expenditure saving. The hope is that the impetus given by the Budget will give encouragement to the middle-sized and small firms which provide much of Ulster's economic well being.

However, it is precisely those firms which have suffered so grievously from the IRA onslaught of the past 10 years. The IRA is waging a fierce and bitter battle against the decent hard working people of Ulster. The IRA is trying to defeat the Ulster people by economic destruction as well as by the murder and mutilation of ordinary workers and members of the security forces. Surely in that grim situation Ulster should not have to withstand cuts to the same extent as the rest of the United Kingdom. Indeed, this should be taken as an opportunity by the Government to show their determination to destroy the IRA once and for all and to give every help to boost the people of Ulster and the Ulster economy.

I am disappointed that the Government have not yet learned the lesson of past Governments—that petrol tax has a greater impact on the rate of domestic inflation than any other tax. In a largely rural community of small towns and villages, with a minimal public transport service—also, incidentally, hammered fiercely by the IRA, which destroys an average of six buses a month by fire or explosive—the price of petrol is, like rent or mortgage, an essential outlay for most families. In my constituency, I know of cases where it costs £15 to £20 a week for a man to travel to his work. Such a man would like to live nearer his place of employment but cannot do so because of the housing situation.

I also regret the Chancellor's decision to bring the selective employment premium to an end next month in Northern Ireland, thus saving, I understand, £7½ million for the remainder of this financial year. There has always been some doubt about the number of persons for whom the premium has created work. I believe that the figure is nearer 3,000 than the 4,000 claimed by the Labour Government. But whether the figure be 3,000 or 4,000 jobs, a cost analysis will show that it is much cheaper to provide employment by means of the selective employment premium than it is, for example, by Enterprise Ulster.

Mr. Donald Anderson (Swansea East)

The hon. Gentleman is putting up a barrage of well-directed criticism of the Government, but how does he reconcile it with the fact that he and his colleagues knew full well what to expect when they ensured that we would have a Conservative Government and now sit on the Government side of the House?

Mr. Kilfedder

The hon. Gentleman is mistaken. I sit here alone. The hon. Gentleman is referring to the right hon. Member for Down, South (Mr. Powell), who sits on the Opposition Benches with the other Members from Northern Ireland. They voted, with two exceptions, to bring down the Labour Government. I am not talking about the merits of the Labour Government or those of this Government. I do not care tuppence for either of the two parties if they are failing to act properly in the interests of the people of Northern Ireland. I made a judgment on that censure motion, and I stand by it. I do not regret my decision. All that I am after here is to bring pressure to bear on the present Government to act fairly and properly for the people of Ulster, and I will continue to criticise them as I criticised the Labour Government. I do not discriminate against either Labour or Conservative Governments.

Enterprise Ulster has done good work, but it is an extremely expensive way of providing work and I should like a thorough examination into its operations. If something has to be cut, it would be better to have a cut in Enterprise Ulster than to eliminate the selective employment premium.

The cuts which are being made in local government in Great Britain, where the local authorities have revenue-raising powers of their own through the rates, are a very different matter from the imposition of cuts on the health and education boards in Northern Ireland. Those boards have no alternative source of income, so that the impact of a pro rata cut in their income is greater than it would be for local authorities in Great Britain. I under-stand that £2 million is to be cut from the Ulster education service budget. Yet the education boards will have to cope with a substantial increase in fuel costs for heating schools, and, with a wide-spread oil scarcity, fuel costs will escalate generally by a substantial amount.

That is not the only added expenditure facing education boards in Northern Ireland. What about the increased financial burden for school transport? One quarter of the pupils in Northern Ireland travel by bus to school at public expense, and another quarter travel at their parents' expense. The increase in the cost of petrol will create great difficulties not only for parents and for education boards but for ordinary passenger transport and road haulage. This is bound to have an adverse effect on the economic life of the Province as well as a serious effect on the pockets of the ordinary Ulster worker.

I turn now to the Department of Manpower and the cuts that I understand are being made there. Money spent on industrial training is money well spent, and I hope that the Government do not intend to reduce it. Removing some of the fat which exists in the organisation would be all right, but they should not interfere with the industrial training being provided in the Province. Since workers in Northern Ireland receive an average of about £4 a week less than their counterparts in Great Britain, the Government should look again at the cost of transport in Northern Ireland. Who will provide the extra cost of travelling by car or by bus for those workers to their place of work? They cannot always live beside their place of employment because the housing situation is so bad.

Constantly I complained to the Labour Government and to their predecessors that the housing situation in Ulster was far worse than in the rest of the United Kingdom. The present deplorable situation, with so many thousands on the waiting lists, with so many thousands living in substandard conditions, and with so many many areas devastated by planners, could not be rectified for 10 to 12 years at the present rate of building. That was the period of time estimated for housing in the Province to be brought up to the level of the rest of the United Kingdom at the present level of building.

But if the Government go ahead with the cut in the housing allocation for Northern Ireland, the Province will probably have to wait for up to 20 years to bring housing into line with the rest of the country. Therefore I ask the Government to think again about the cuts that they intend to impose on Northern Ireland. Certainly let them reduce the cost of the bureaucracy in the Housing Executive, Enterprise Ulster and elsewhere, but let them not allow the Ulster people to suffer.

Another aspect is the hospital service. In my constituency, we desperately need a decent hospital. Bangor hospital needs to be brought back into being as a real hospital. I hope that the Government will think about the Ulster people, who are already suffering the agony of terrorism and a standard of living far below that of the rest of the United Kingdom. I depend on this Government to fulfil the pledges they made to the people of Northern Ireland.

7.48 p.m.

Mr. John Garrett (Norwich, South)

It is impossible to disentangle the social provisions of the Budget from the background factors of its general economic effects and its general philosophy. At the beginning of his Budget Statement the Chancellor of the Exchequer referred, rightly to Britain's relative economic decline over many years in economic growth, in the share of world exports, in output and in productivity. We are all familiar with the facts of this decline and how intractable it has proved to be under successive Governments.

The causes are deep-seated, as much social and cultural as industrial, and deserve most careful analysis and selective action. It was a pity that the Chancellor did not refer to some significant facts set out in the Financial Statement and Budget Report, namely, that last year, for the first time since the war, Britain's share of world trade in manufactures actually increased, that the growth in gross domestic product was historically high at 3 per cent. and that real disposable income rose by 7½ per cent. That is an exceptional increase in prosperity for Britain. Unemployment in this country fell, while in most of the Western world it was rising. In addition, the Government launched whole new programmes for the disabled, and for children through child benefit.

The Chancellor referred to our decline without mentioning the immediate back-ground of these encouraging economic developments and then proposed what he called "a new beginning", based on four principles—incentives, freedom of choice—so-called—reducing the burden of the public sector and cultivating among trade unionists a proper sense of responsibility"—[Official Report, 12 June 1979; Vol. 968, c. 240.] The incentive argument is interesting It is predicated on the belief that a married man who earns £5,000 a year will be dynamised by tax reliefs of about £3 a week and that a man on £10,000 a year will be galvanised into a much higher rate of performance by tax reliefs of some £6 a week. The psychology of that argument is doubtful.

Even if the argument were true, the degree of incentive must be seen against the extent to which the recipient of tax relief believes he will actually be better off. We will first look at the prospective rate of inflation. The Financial Statement and Budget Report says that it will reach 16 per cent. this autumn, and the Government have since said that it will hit 17½ per cent. This calculation seems to me not to give full weight to the effect of a cut in the rate support grant on rates, the inflationary effects on interest rates in housing and construction and the cuts in finance for electricity, gas and coal. Our archetypal middle manager, hitherto reduced to torpor by his tax bill, and now vibrant and alert, is faced with an inflation rate that can hardly be less than 20 per cent. within the year, a rate imposed on him as an act of policy by the Government.

There is worse to come. Freezing cash limits at half the rate of the prospective level of inflation will massively reduce employment in the public sector. Restricting the money supply, to make sure that wage increases which match the rate of inflation lead to commensurate increases in unemployment, must force up the private sector levels of unemployment. High interest rates also act as a restriction on investment and a further force to the deindustrialisation of Britain. Our taxpayer with his £3 or his £6 a week burning in his pocket is therefore expected to be dynamic and inspired in an economy which will have been brought to a dead halt.

The freedom of choice argument is equally bogus. Only hermits will have the freedom to avoid increases in VAT, and only the very wealthy will have significant economic freedom conferred by tax reliefs. What freedom will the new legions of the unemployed have?

It is all very well to talk about the burden of the public sector, although how one can talk of education, health care or transport as a burden escapes me. It is part of Tory mythology that the private sector is productive and innovative, while the public sector is a load on our shoulders. While British private industry has shown itself consistently unable to hold its own in innovation and technical development, except with the assistance of Government funds, British Gas, the National Coal Board, the Atomic Energy Authority and the National Enterprise Board have established international reputations for technical innovation.

The unstoppable flood of manufactured imports into this country, which I believe to be our most serious economic problem, has come as a result of a basic uncompetitiveness in technological, marketing and production functions of British private industry. It has not come about because of the burden of the public sector.

I come now to the next principle enunciated by the Chancellor—promoting "a proper sense of responsibility" among trade unionists. Trade unionists are faced with an inflation rate of 17½ per cent. and rising, and with inexorably increasing unemployment. What level of wage demands is reasonable under those conditions? Should union leaders halve their members' standard of living by asking for, say, 7 per cent. or 8 per cent., or should they be more realistic and seek only to match the cost of living, by asking for 17 per cent. or 20 per cent.? They know as well as anybody that a year of battling for 20 per cent. or more will be followed by a wage freeze, and that that will be followed by a wage explosion, and so on, until the day when we can get a sensible incomes policy in which prices, dividends, investment and jobs are all taken into account and a rational allocation of wealth and income is arrived at.

One factor which the Chancellor never mentioned is Britain's staggering propensity to import manufactured goods. Last year gross domestic product rose by 3 per cent. and manufactured imports by 13½ per cent. The bulk of any increase in home demand is met by manufactured imports. We have the highest propensity of any developed country to import manufactures.

Successive Governments have rejected import controls and a planned growth of imports, for which some of us on the Labour Benches have argued. We have watched our home manufacturing capacity decline, year in and year out. This Government, with their enthusiasm for free market economics, will doubtless let the process continue until we are virtually an underdeveloped country buying in manufactures in exchange for oil—while it lasts.

Indeed, one can see this process being expected to happen next year, from the Government forecasts, which show a further drop in manufacturing production and, as far as I can see, an increase in manufactured imports of 5 per cent. or more. This is the main symptom of the decline to which the Chancellor referred. I see no resolution of it in the Budget.

It is against the background of a declining economy that we must consider the social effects of the Budget. On social expenditure, I greatly regret the decision not to increase child benefit. Child benefit is of enormous importance to mothers in poor families. It seems to me to be the highest priority for social expenditure.

I equally regret the failure to ensure that pensioners share in the country's prosperity by linking pensions to earnings. Pensioners and mothers in low-wage families are given the minimum by this Budget. The rich are given the maximum. That is the set of priorities which the Government have assigned for our community.

The most disadvantaged by the Budget are the rural poor. Their benefit from tax reliefs is modest. They suffer unduly from public expenditure cuts, particularly if they live in the Tory shire counties such as Norfolk, where local authorities care nothing for public services, and they are very hard hit by petrol price increases.

Norfolk is the home of the old car. Though its level of earnings is 10 per cent. below the national average, it has an exceptionally high level of car ownership because of the need for private transport in an area of dispersed settlements and almost no public transport.

The people of Norfolk will not find much incentive in this Budget. What they will find is a savage attack on their living standards and a further, Government-induced fall in their social wage. A low-wage area such as Norfolk depends disproportionately on public expenditure to make up its living standards.

In my relatively low-wage constituency the people will face cuts in public expenditure and in public employment, the end of the dispersal of Civil Service jobs and the shadow of the axe over the Government's scheme of assistance for the most important local industry, footwear manufacture.

The economic implications of the Budget are for raging inflation and unemployment and a race of competing wage claims. The social implications are for declining community services, community provision and community care and a reduction in the social wage.

It is the most doctrinaire Budget produced since the war. The old generation of one nation welfare Tories must be sitting appalled in their places of exile. The Government have set themselves on a course for economic collapse and social unrest. They have set the controls for the heart of the sun, and all that the rest of us can do is watch their selfdestruction.

8.0 p.m.

Mr. Chris Patten (Bath)

I am grateful to you, Mr. Deputy Speaker, for calling me this evening. I am even more grateful to the electors of Bath for giving you the opportunity to do so.

It is a custom that in getting off the mark in this House one should attempt to avoid controversy. That is a daunting challenge for most of us. I have heard and read a number of maiden speeches over the last two or three weeks and I must say that the word "controversial" seems to be defined in a fairly relaxed way. The first I heard in this House began with a colourful attack on the Iron Lady, whoever that may be, and went on to give some crisp advice to Chancellor Schmidt on how to run the West German economy, for which I am sure he was very grateful.

I shall try to stay within "the meaning of the Act" and to avoid controversy. I begin therefore with the entirely uncontroversial remark that I have the honour of representing the most beautiful city in England. In doing so, I follow a notable servant of this House, Sir Edward Brown, who represented Bath for 15 years and previously worked at every level in the Conservative Party, ultimately becoming chairman of the national union, which is a slightly different body from the national executive of the Labour Party. He was a diligent Member of Parliament. He worked extremely conscientiously for his constituents. In a few weeks, I have already come across countless examples of his courtesy and consideration. He was a hard worker in this House where he chaired a number of Committees, and he spoke knowledgeably in the Conservative Party about trade union matters. I hope that I shall be able to match his service to the party and the country. In saying that, I am all too aware of the fact that Bath has been called the graveyard of ambition. If this is indeed the case, although I am sure that none of us would admit to any greater ambition than the chance of representing our constituency in this House, then, to mix metaphors, I cannot imagine anywhere better to hang up one's boots.

I shall not take hon. Members on a verbal guided tour of Bath. I am sure that they will excuse that. I would not want to deter any of them from visiting Bath, if they have not already done so. I would say quickly, in the hope that the chamber of commerce is listening, that if hon. Members come to Bath I should be grateful if they would stay in Bath rather than Bristol.

Bath is not a museum piece. It is an extremely busy city, although not quite as busy as we would like following the rise in unemployment in the last few years. It depends a great deal for its prosperity on a number of fine engineering firms. It would not be an exaggeration to say that those firms and my constituency will depend a great deal for their future prosperity on this Budget.

I suppose that one can easily over-estimate the impact on the economy of what my right hon. and learned Friend the Chancellor of the Exchequer once called, in a speech to which I shall return later, an "archaic ritual". Nevertheless, our success in the future hangs very much on some of the decisions which the Chancellor announced on Tuesday. He had an unenviable job, first—and I must try to avoid controversy—because of a less than wholly satisfactory inheritance. Hearing so many speeches from the Opposition Front Bench, such as the speech of the right hon. Member for Leeds, East (Mr. Healey) yesterday, about the state of the economy on 2 May, I sympathise very much with the story of the late Lord Avon's father who was once seen throwing the family barometer out of the front door into the pouring rain, shouting after it "Set fair, eh! Get out there and see for yourself."

We must also sympathise with the Chancellor since he has confronted in this Budget what he described at the beginning of his statement as the crisis of decline, which is no less real for having become recently the subject of increasingly fashionable discussion. If he is right—I think he probably is—that we are poised somewhere between relative and absolute decline, and if he is also right—again, I agree with him—that the decline is not irreversible, the burden on his shoulders these last few weeks has been considerable. One of the troubles is that many of us who agree with him about the seriousness of the present situation are reluctant, or have been reluctant, to accept some of the changes that are necessary to do anything about it. Like St. Augustine, we have all wanted to be virtuous but not quite yet. I plead guilty to that charge.

But it is difficult, I should have thought, to make out an overwhelmingly convincing case for the status quo. If one is to change things, one has to start at some time and somewhere. I am sure that the Chancellor was right this week to take his courage, and ours, in both hands and plunge ahead.

My right hon. and learned Friend identified correctly three main tasks. First, as the noble Lord Robbins once said, one can be agnostic about the precise effect or incentives of given rates of tax. But even most Labour Members, I believe, would agree that a 100 per cent. rate of tax would have a pretty serious effect on incentives. It is therefore not very sensible to argue that some slightly lower rate than 100 per cent. has no effect whatever.

I was pleased that the Chancellor chose in his Budget Statement to place so much emphasis on restoring incentives right across the board. I should like to be able to turn to some of the arguments advanced by my pair, the hon. Member for Birkenhead (Mr. Field), about incentives. Alas, he is not here, and I have insufficient time, but I look forward with relish to returning to that topic on some future occasion.

There is obviously some risk in making such a substantial shift from direct to indirect taxes when the underlying rate of inflation is increasing. I am sure, however, that the Chancellor was, on balance, justified in taking that risk. I am pleased that in doing so he has seen that pensioners are protected from the one-off increase in prices that will result from the rise in VAT. I hope that he will also encourage the Treasury to be as imaginative as possible in thinking about the impact on VAT on the performing arts, particularly the theatre.

The second task for the Chancellor was to reduce the public sector borrowing requirement this year and in subsequent years. He has spoken in the past about the advantages of acting with "all deliberate speed." It was perhaps a pity, but inevitable given the fact that the PSBR was much larger than anticipated, that he had to act so rapidly on public expenditure. One of the problems of acting so swiftly is that sometimes the cuts one makes in the short term discredit the important longer-term exercise of getting public expenditure under firm and lasting control. On the whole, the Government seem to have avoided that situation. I am grateful that what would have been a departmentally easy cut in the Department of the Environment has not been made in the programme—which is already hard-pressed—for conserving our historic heritage. I am grateful that that programme has not been cut.

One easy cut, I suggest to my right hon. Friend is, the "pork barrel" scheme for reallocating civil servants' jobs from one part of the country to another and particularly the eccentric, extravagant and, what I believe is the vogue word, "reckless" scheme for moving 800 or more jobs from Bath to Glasgow. I am pleased that the Minister of State, Civil Service Department told me in a written reply at the beginning of the week that that scheme is to be reviewed. I must tell him that I would find it very difficult to explain to my constituents why I had voted in favour of the Adjournment motion for the Summer Recess if that review had not been completed by the end of July.

One other thing which I hope Ministers will remember in thinking about public expenditure is the speeches they made in Opposition about the importance of increasing parliamentary control over the Executive, about overhauling our antique budgetary procedures, about ending, in the words of my noble Friend Lord Cockfield, the divorce between Government spending plans and parliamentary control. In a very good speech to the LSE in 1977 on this subject, the Chancellor himself said: Whether as Ministers or as parliamentarians, it is we who are in charge. Only we can change the system. Quite so.

I hope that the Government will show that they are as keen on those issues now as they were before the election and, for example, will give the proposals of the Procedure Committee a fair wind when they are debated next week.

The third task that the Chancellor and his right hon. Friends have had to deal with is the establishment of a more balanced relationship between the trade union movement and the rest of society. In that context I was a little disappointed that there was not in the Budget more encouragement of ownership through profit-sharing schemes. I am also dis- appointed that we have not yet heard much about the Government's thoughts on the improvement of bargaining structures.

Obviously there is agreement on both sides of the House that the Budget will have some impact on the attitudes taken during the next pay round and the one after that. The CBI has put forward imaginative proposals for improving pay bargaining. It would be nice to have heard the Government's thoughts on that, Perhaps we shall hear them later in the debate.

If anyone else has any better ideas than the CBI about how to reconcile pay moderation and freedom, I am sure that we should be delighted to hear them. Among other things, we need some kind of forum where the major participants in the economy can sit down calmly to consider the implications for prosperity, as well as for unemployment and pay bargaining, of the Government's fiscal and monetary policies. Those words were written by my right hon. and learned Friend the Chancellor and by the Secretaries of State for Employment, Industry and Energy and the Paymaster General in a pamphlet called "The Right Approach to the Economy", published a couple of years ago. They were absolutely right then and I think that they are right now.

I was disappointed to see an article on the back page of the Financial Times this morning suggesting that Ministers are not thinking in that way any more. I imagine that that suggestion could only have been a jeu d'esprit by the labour editor of the Financial Times. I cannot imagine that it represented the Government's real intentions.

The Chancellor has set out in his Budget on a long and arduous road. None of us on the Government Benches believes in "hey presto" economic strategies or that one Budget can turn everything around. But we do believe that there are more sensible and less sensible ways of steering the economy. The Chancellor has started this week in a characteristically sensible way. I am sure that we all wish him at least as long in the job as his predecessor has had. Judging from his first Budget, whoever eventually succeeds him will have a much easier and more agreeable task than he has had this week.

8.14 p.m.

Mr. Clive Soley (Hammersmith, North)

I am grateful for the opportunity to speak today. I, too, would like to thank the many Members and Officers of the House who have been so helpful to me since my arrival. Also, as one maiden speaker to another. I congratulate the hon. Member for Bath (Mr. Patten) on his speech. I congratulate him particularly on managing to avoid being non-controversial. I shall try to do likewise.

Coming from Hammersmith, North is an interesting experience, if only because it has an interesting and explosive history The representative before last was one D. N. Pritt, who was extremely well known in the House, held the seat for many years, eventually fought and won as an independent and then was replaced by my predecessor, Mr Frank Tomney, who held the seat for more years than I have held it days—29, in fact—and who will be well remembered in the constituency.

North Hammersmith, although interesting, has many of the problems associated with inner cities. One which is relevant to this debate is the problem of low income. The area therefore has an accumulation of social problems. A year ago, nearly half of all households there had an income of less than £20 per week per person. That important figure tells one much about the problems of the area and its people.

I ask the House to consider what it means to be given the opportunity in those circumstances to buy one's own council house or flat. That is the policy at the moment of this Government, of the GLC and of Hammersmith borough council. If nearly half the households in an area have such low incomes, who will buy those properties? When one remembers that the incomes increase only slowly up the scale over that figure, one begins to realise the serious extent of the problem, which will not be solved by such palliatives.

A result of that policy, by the GLC in particular, is that people asking for transfers to better properties within the GLC area are now being told that they cannot go to West London. It has to be East London, with all that that implies for family relationships and friendships.

Three-quarters of the properties in North Hammersmith are more than 60 years old, which produces major problems of maintenance and in buying and selling property. Many of the schemes introduced by the local authority have been designed to help, and I welcome that.

Twice the number of children are in care in North Hammersmith than the GLC average. It has the second highest number of single-parent families in the country, the second highest proportion of over-65s in inner London and the second highest number of hospital admissions for mentally ill and mentally handicapped in inner London—in other words, a combination of the type of social and economic problems that I have described, stemming largely, although not entirely, from low income.

Unemployment for the under-20s has been rising in the area at twice the average rate, particularly for the West Indian community. I think that in 1971 nearly a quarter of all West Indians of that age were unemployed. The area has a good reputation in race relations, and it is my aim to maintain it since I regard it as particularly important. I am proud of the ethnic minority groups in my area who have added so much to the culture and quality of our society there.

The factors that I have listed are the inner city problems about which we talk. They are not unique to North Hammer-smith, but I think I have shown that they are much greater there than in other areas. That was recognised by the previous Secretary of State for the Environment when he made Hammersmith a programme authority—the only one in the South of England. There are partnership authorities, but Hammersmith is the only programme authority, thus gaining special aid. It will be a priority of mine in the House to ensure that the present Government do not cut that aid, which is vital for inner city areas.

I must ask myself not only what does the Budget do for the country, but what does it do for the people of North Hammersmith? A married couple earning £60 a week will have a net saving, after VAT is taken into account, of 77p per week. I shall receive about £4 a week. I wonder whether I shall really do £4 a week more work and how that will be measured against the person who receives only 77p a week.

I also ask myself a basic moral question. Is it right? When Hammersmith council changed hands and the Liberals held the balance of power, it froze the rates. In effect that meant a cut in rates because of inflation. It is easy to cut taxes and to freeze rates, but there is a social cost.

I understand when people say that the social cost cannot be measured. Perhaps it cannot be measured, but we know the cost in terms of the quality of human life. We may not have the ability to measure the cost in the same way as we can measure money, but nevertheless there is a real cost. The cost came home to the people of Hammersmith, North when there was an attempt to close one of the luncheon clubs and when there was a successful attempt to double the price of meals on wheels. That is what cuts and freezes in rates mean.

A friend from a rapidly developing nation said to me some years ago "I cannot understand why the British people complain about taxation. Everywhere I go there are good roads, schools and hospitals. When I go a few miles outside my home town, poverty is all around me. What are the British complaining about?" My friend was right.

Public expenditure cuts can only make the situation worse. They cannot improve it. They can only make it worse, except for a minority of people. I shall probably do quite well out of the Budget. I am not proud of that. I am not pleased about it. I like to think that no hon. Member will be pleased about it.

The Chancellor bases his strategy on the idea that if one cuts taxes, people will be given a greater incentive. It has become a commonsense myth. We all live by common sense, and we need it. But common sense can become common nonsense. There is no evidence that people will have more incentive.

A number of studies in this country and elsewhere demonstrate that for countries with tax bands similar to ours this method is irrelevant. There is evidence that a high rate of taxation can increase effort. That is because a person on a low income has to work hard. There is evidence of that in the developing nations. It is dangerous to base a Budget strategy on an assumption which is far from proven and which encourages the idea that some people are infinitely more valuable than others.

I accept that people make different contributions to society. However, it is difficult to measure how a mentally handicapped person, for example, who has no way of competing with me, is to be rewarded if the rewards are based simply on achievements in our economic structure. How is the value of a physically handicapped person to be measured? How is a person to be measured if he comes from a deprived urban area and he does not battle and fight his way to the top? There can be strong arguments for unfair actions, but no moral argument can justify such actions to the person at the lower end of the scale.

The Government have to remember that if they attempt to justify economically tax cuts and higher wages for people at the top, there are no moral arguments to prevent a person at the lower end of the scale doing everything that he can to get more. This is a crucial issue because it is the type of issue that can bring a Government down, as we have seen in the past.

I can understand the Government feeling proud of themselves and preening themselves, having won the election. They deserve to do that. But when one is preening oneself, one should remember, particularly if one is a chicken, that it might be Christmas Eve and the oven might already be alight.

8.26 p.m.

Mr. Nick Budgen (Wolverhampton, South-West)

I have pleasure in welcoming the distinguished maiden speeches which we have enjoyed today. I particularly enjoyed the speech by the hon. Member for Hammersmith, North (Mr. Soley), who demonstrated that, like many of his hon. Friends, he is a firm believer in the almost universal beneficial effects of big government and more government. I expect that he and many of his hon Friends will be lashing us in the months and years ahead.

The House also enjoyed speeches of great distinction and eloquence from this side of the Chamber. It would be invidious of me to mention all the speeches that have already rightly been commended to the House. The love of hon. Members for their constituencies rings out through all the maiden speeches from the Government Benches.

The last Parliament was long. To many candidates in Labour constituencies, it must have seemed to be an interminable Parliament. One of the advantages was that Tory candidates who were to become Tory hon. Members came to know and love their constituencies and became so obviously persons who would be most able to represent their constituencies in the House.

Since none of my hon. Friends has had the pleasure of commenting on the last maiden speech from this side of the House, it is my pleasure to comment in more detail on the speech by my hon. Friend the Member for Bath (Mr. Patten). He commented generously on the important role played by his predecessor, Sir Edward Brown. Sir Edward's advice upon trade union matters was much valued in the councils of the Tory Party. It will be a pleasure to him to know that his place in the House has been taken by a man who can bring to discussions such intellectual distinction. My hon. Friend the Member for Bath delighted the House with a speech of eloquence, self confidence and of intellectual distinction and ease.

I turn now to the main message of the Budget, which was that the Tory Party well understood the resentment that was felt throughout the country at the very high levels of taxation being imposed upon the incomes of every citizen. That message is well taken. But I hope that we may look a little further forward, away from this first highly satisfactory Budget towards a second equally satisfactory, but arguably more difficult one. The Tory Party can be sure of the resentment that is felt towards the last Labour Government, but I have to concede that it is by no means certain that everyone in the country has understood the philosophical difference between the present Tory Administration and the last Tory Administration. It is by no means certain that everyone in every marginal constituency had, for instance, read every speech written by my right hon. Friend the Secretary of State for Industry, or that, if they had, they agreed with him.

We have to persuade the nation in the next year or so not just that it hates Socialism, but that it at least tolerates Tory principles. I suspect, therefore, that we must approach the next Budget with a desire to cut taxation yet again, most of all to cut it in the most expensive areas—the standard rate. By then, every 1p that is taken off will cost about £500 million. I believe that it is the well paid skilled industrial worker in areas such as the Midlands who resents taxation most of all. The Tory Party rightly represents those like the self-employed and the small business man who feel the bite of heavy taxation. But they have opportunities for lawfully mitigating their tax burdens. Some of them take the opportunity unlawfully to mitigate their tax burdens. But the man who works at a dreary job—for instance, knocking pieces of metal into other pieces of metal on the British Leyland assembly line—works mainly for his take-home pay. Difficult though it will be within the constraints of our monetary policy and of our desire eventually—and I say this hoping to provoke some sort of response—to move towards a balanced Budget, I hope that the next Budget will see substantial cuts in the tax payments of skilled manual workers.

That will not be possible without a major reduction in public expenditure. It is, of course, possible to cut public expenditure in a big way and quickly. But there are many disadvantages in that. The right hon. Member for Llanelli (Mr. Davies), the former Minister of State at the Treasury, will recognise the disadvantages of the cuts made in 1976. On the whole they were cuts not in current but in capital expenditure. They had a disproportionate effect on the construction industry. I see other hon. Members nodding in agreement. They had an unnecessarily disturbing effect on the economy.

Mr. Denzil Davies (Llanelli)

I go along with much of what the hon. Member said. But he will recognise that in this Budget there is probably an increase in current expenditure. When the Chief Secretary wields the axe next January, he will find that because of increased unemployment and the indexation provisions of pensions, current expenditure will be rising and he will have to cut more heavily in those areas he would most wish not to cut.

Mr. Budgen

The right hon. Gentleman is a careful and fair contributor to our debates Contrary to the view expressed by many Labour maiden speakers, there have not been massive cuts in public expenditure, and I accept that it would not have been possible in six weeks to cut public expenditure in a cost effective way. Therefore it is important that we should not, at this stage, pretend that public expenditure has been cut. Perhaps the best guide to the fact that public expenditure has not been cut is that the minimum lending rate has gone up by 2 per cent.

If there had been a really large cut in the public sector borrowing requirement and it was not necessary to borrow a large sum from the market, it would have been possible to atract those funds into the Government's maw by lower rates of interest. When one looks at the Chancellor's list, which he says adds up to £1½ billion—and I refer now to column 247 of the Budget Statement—one finds that it is obvious that most of the cuts are—I will not be so offensive as to call them "fudging" cuts—accountant's cuts rather than the deep surgical cuts made by one who wields the knife at rather more than skin depth.

For instance, a £50 million cut in the aid programme is hardly a very big cut out of nearly £2 billion of expenditure. To knock £250 million out of the contingency reserve is hardly a real cut. Again, when one looks at the vast budget of the Department of Industry, to take £210 million out of industrial support, or to delay the payment of regional grants by £170 million, is not cutting public expenditure to any great extent.

I hope, therefore, that the Opposition will not be carried away by their own rhetoric. There have been no substantial cuts in public expenditure in this Budget. Of course, the promise to cut the public sector borrowing requirement below £8.5 billion has just been adhered to. I say "just" because, of course, that promise is made possible principally by the proposed sales of BP shares. I am in favour of the sale of BP shares, and I am in favour of the sale of public assets generally, because I want to see a switch of wealth power away from the public sector towards the private sector. But I am not at all sure that that can properly be described as a reduction of the public sector borrowing requirement. It is much the same sort of operation as raising money by selling gilts. All that happens is that instead of selling gilts, BP shares are sold.

So I do not, I repeat, conclude that any very great cut has been made in either public sector borrowing or in the size of public expenditure. I believe that it will not be possible to cut public expenditure until we have satisfied the country of basic Tory principles. I repeat that we have satisfied the country that it does not like Socialism, or at any rate that it did not like the sort of Socialism, plus monetarism by stealth, of the preceding Administration.

We must now persuade the country that it should support the present Conservative philosophy and that it should accept freedom of choice. We should persuade people that with that freedom goes responsibility, so that they understand that cutting taxes means, in many in-stances, the bills coming in. There is no easy way out of this. The country must be persuaded that, when we talk about the need to set the nation free, a price has to be paid, and that government is about choice and that choice is usually fairly evenly balanced.

I hope, therefore, that the coming year will see the Tory Party engaged in a major and honest discussion with the electorate about the role of the State. For instance, let us have a frank discussion about the advantages of giving money to overseas aid. Here, I much commend the remarks of the Chief Secretary about our enormous contribution to the EEC. But in considering overseas aid could we not, for example, ask the Commission why it proposes to say to Thailand that it may not export any more manioc into the EEC?

Could we not ask, for example, whether it offered a more dignified way of life for Thailand to be allowed to earn its living by selling manioc which might be fed to cattle in the Community than for Thailand to be told "We do not want your manioc, but we shall give you £x million in foreign aid which may be distributed at the whim of your politicians"?

Perhaps we may have a discussion about foreign aid in general and ask ourselves whether it is better that money should be borrowed and then allocated according to market criteria rather than according to the preferences of politicians. A great sum, not far off £2 billion, is being spent by the British taxpayer on foreign aid at present. Might we not have a discussion about that?

Again, with reference to the education budget, might we not have a fundamental discussion about why it should be that all parents who send their children to State schools need to have their children's lunches subsidised? We can put this in fairly simple terms. It is costing about £400 million a year to subsidise school meals. That is about 1p off the standard rate of income tax. Can we not ask taxpayers generally whether they would rather give their children lunch and pay 1p less on their standard rate? Surely, these are discussions which we should have with the electors to try to persuade them that Tory Freedom and responsibility works.

Yet again, let us have a proper and serious discussion about industrial policy. Let us not just have the former Chancellor of the Exchequer abusing my right hon. Friend the Secretary of State for Industry for the monetarism which he, the former Chancellor of the Exchequer, adopted. Let us have a proper discussion about whether it is possible to have selective intervention in both the employment market and industrial matters generally and at the same time avoid the corruption of politicians giving to their friends benefits which they, the politicians, do not pay for; and let us consider whether we can combine that with a changing vibrant economy which is able to respond to the changing satisfactions and changing fashions of consumer desires.

Here is another area for consideration. May we next year have a discussion with some degree of honesty about the £1.5 billion which we give towards council house rents, where those rents are paid by people who have at least the average income? It is that quixotic element of subsidy to those who do not need subsidy that we shall have to discuss with the electorate.

All these issues will have to be discussed if we are to make a basic bond with the British people and ensure that they do not merely reject Socialism but understand the advantages of Tory freedom and Tory responsibility.

It will not be enough to attack the Civil Service. It is we, the politicians, who employ the Civil Service. It is we, the politicians, who give the Civil Service its functions. The only honest discussion is about the role of the State in our society. If we wish seriously to cut public expenditure, we shall have to reduce the functions that are presently carried out by the State.

We shall have to satisfy the British people that our attack upon the previous Administration was not merely the usual cry of an Opposition hungry for office, but our fundamental scepticism about the beneficial effects of an interfering State.

It will not be enough to support State intervention when it is introduced by a gentleman wearing a Brigade of Guards tie. It will not be enough to say that a quango ceases to be a quango when it adjourns after its deliberations to the Carlton Club.

No. We must oppose State intervention and State subsidy for profound philosophical reasons—because we believe in private activity, because we believe that the role of the State has become too large, and because, most of all, we wish to enhance the role of the individual.

8.47 p.m.

Mr. Frank Hooley (Sheffield, Heeley)

I compliment my hon. Friend the Member for Hammersmith, North (Mr. Soley) on a thoughtful and humane speech. It was in the very best tradition of Labour Party thinking. I look forward to hearnig his future contributions in the House.

I also compliment the hon. Member for Bath (Mr. Patten) on a maiden speech which appeared a delightfully relaxed exercise. I wish that I could make such a relaxed speech. I enjoyed the hon. Gentleman's style of delivery as well as his argument. I look forward to hearnig, though undoubtedly not agreeing with, his statements in the future.

The message of the Budget is clear. It is incomes policy, Tory style—more to the richest of the rich, less to the poorest of the poor. After all the Tory Party statements about the sanctity and impor- tance of families, what they have done to ordinary families is staggering. The combined impact of almost doubling VAT and pushing up interest rates to a lunatic level will savagely hit every family, apart from the tiny minority of the very richest.

Mortagages will increase. Rents will increase. Rates will increase. Water rates will increase. Charges will increase for electricity, gas, fares to work, telephones, for such items as having a suit cleaned, getting the children's shoes repaired and hairdressing—which may not matter to the Chief Secretary but does to the 25 million women in Britain.

Food prices will increase. The Government claim that VAT does not fall on food, but when the green pound is devalued, and when the Commission receives its extra levy on food, food prices will increase, as will the cost of food processing and transport.

School meal prices will increase; so will prescription charges. The cost of running a modest family car is increasing. Recently The Daily Telegraph said that to run an ordinary family car—nothing ambitious or splendid—would cost another £96 a year, or £2 per week more. Inflation is racing to 17½ per cent.—that is probably the lowest calculation—against 7½ per cent. last October. That will have an appalling effect on the family budget. The decisions on VAT have deliberately pushed up all prices, as have the decisions on dear money. The protection of the Price Commission against profiteering and exploitation has been de-liberately destroyed by the Government.

What will be the compensation for all that? What will the orginary citizen get back to compensate for this massive increase in indirect taxation which will push up the cost of borrowing and interest rates? Anyone earning £60 a week or less—and according to statistics supplied by the Library there are about 8 million earners in that bracket—will receive an additional, miserable £2 a week to compensate for a huge range of increased charges on fuel, fares, food and almost everything else.

There are about 12 million people earning from £60 to £120 a week. They will be compensated by an additional £3 per week from tax reductions for the increases on almost every item in the family budget. The Chancellor referred to the mythical, skilled worker earning £500 a week. I should have to hunt around in Sheffield for a long time before I found a skilled worker earning £25,000 a year. However, workers in that bracket will receive an additional £60 a week to offset the extra charges. No doubt, on that basis, the other people in the top income brackets will manage well.

Most astonishing, in terms of family finance, is the total failure to increase child benefit, coupled with the fact that there can be no increase in the child tax allowance, as that is to be phased out. Many hon. Members have made that point, and I shall not labour it.

The trade unions will fight back to maintain their standard of living. There will be increased industrial strife or a wages explosion. The hideous round of inflation will go racing away again, to nobody's benefit—certainly not to the benefit of the economy.

Industrial investment is the key to our economic problems. In 1970 we gave to the incoming Tory Government two useful instruments for dealing with industrial regeneration. One was the Industrial Reorganisation Corporation, the other was the system of investment grants. The Tories fell over themselves to destroy both almost as soon as they came to office. Subsequently we heard the pathetic wail of the right hon. Member for Sidcup (Mr. Heath), which still echoes down the corridors of Whitehall. He said "I gave this to the country, but industry did not invest. I floated the currency, but still there was no investment." However, the right hon. Gentleman destroyed the instruments which we gave to him which would have been useful in dealing with the problem of industrial investment.

This time a Labour Administration bequeathed to the Tories a number of extremely powerful instruments for dealing with industrial investment. We developed, or created, the great public corporations in steel, aerospace and shipbuilding. Rolls-Royce was taken into public ownership by the Tory Administration. The Labour Administration took into public ownership British Leyland, coal, gas, electricity, the BNOC, ICL, atomic energy and a great range of public corporations, with their enormous technological and engineering skills. I refer to steel, aircraft, telecommunications, aero engines, computers, advanced transport tech- nology, microelectronics, scientific instruments, nuclear power, chemicals, oil, cars, trucks, buses and a range of the most advanced technological techniques and products in the world. We put them into public ownership and under public control.

In addition, we created the National Enterprise Board for those who did not like a large single public corporation. All that we built up to give an instrument of economic power and industrial regeneration to the Government. If they were sensible enough to pour capital into these industries, these great public corporations and the National Enterprise Board, they would create the possibility of immense productive capacity in the corporations. In bodies which are partly publicly owned, such as NCL, there would be regeneration, re-equipment and modernisation. In addition, those corporations are major customers for an enormous range of private industrial products.

The total effect could be a genuine modernisation of British industry, but what are the Government intending to do? They are to cut back on the capital programmes of public corporations. Indeed, they are threatening to break them up. What better way could there be to demoralise important industries such as the aircraft industry than to threaten to hive off an industry to the private sector and break up the management? It will undermine the morale of the managers and the people working in that industry.

The raising of interest rates will like-wise create appalling problems not merely for the public corporations but for private industry. One of the most pathetic passages in the Red Book is the passage on page 9 which states: The recent high level of interest rates cannot, however, be favourable to investment. So what do the Government do? They jack up interest rates even higher and put the MLR at the absurd level of 14 per cent. How on earth can that do any good to industrial investment and the regeneration of British industry?

It might be thought that the Government are not relying on the public corporations, that they do not trust them, that they want to cut back and destroy them because they do not believe in State power. Perhaps they are relying on the private sector. But what does the Red Book say in the next sentence? It says: On balance total private sector investment is forecast to be roughly constant over the period of the forecast. Not only are the Government not going to put capital or resources into the great public corporations, but they are happy to see that the private sector does not invest either, or at any rate not significantly more than at its present level. In other words, the Government are not tackling the fundamental problem of the economy at all. They are making it worse. They are simply not looking at the real problem of modernising British industry and making it competitive in international markets.

It is an article of faith, apparently, for the Chief Secretary that any investment in the most advanced technology in this country, if it is in the public sector, is advanced technology but because it is advanced technology, but because it is public sector investment. That is his basic economic faith.

There is something even worse than that. The policy of overvaluing the currency means that imports are to be cheaper and that exports are to be dearer. It means that we shall be hit by the flood of imported goods and that it will be harder and harder for British industry to compete in world markets, or, indeed, to compete in our own market against the products of France, Italy, Japan and other countries. On top of that we have the dismantling of exchange controls, so that the capital that is available—presumably Conservative Members think that it ought to go into British industry—will have every incentive to go abroad to South Africa, or wherever it may be.

The outlook for the average British company on this Budget is as gloomy and disastrous as the outlook for the average British family. I am not surprised that the Chancellor has achieved the rather remarkable feat of outraging simultaneously not only the TUC but the City, as the Financial Times shows, with the index having slumped by about 70 points in three or four weeks.

The other related matter is unemployment. The public expenditure cuts will reduce employment in the National Health Service, in education, in local government and in the Civil Service. Un- employment has been far too high, but it was going down. The great achievement of the previous Government was that we created a sophisticated instrument, in the form of the Manpower Services Commission, with a wide range of measures to train, redeploy and build up the skilled manpower which this country needs in an age of microprocessors and genetic engineering. The Manpower Services Commission's job was not to create artificial jobs. Its remit was to deal with the intricate problems of redeployment, retraining and the development of skilled labour. It was beginning to tackle those problems.

However, what has happened? The special temporary employment programme has been cut by £42 million, with 35,000 places cut down to 14,000. The youth opportunities programme has been cut by £25 million, and the training opportunties scheme by £22 million. As the Government handout says, this will affect a wide range of training opportunities. It is a deliberate attack on one of the key areas in which we need a special extra effort in the training and development of our manpower. That extra effort should be coming forward because there are problems of manpower at a time of technological change. Nobody can ignore that. What is important is that one should have powerful and effective instruments with which to tackle that problem. However, certain elements of private enterprise in this country have demonstrated that they are unable to deal with the problem and, indeed, are not prepared to do so.

Finally, I wish to mention the shoddy and miserable cut of £50 million in over-seas aid. It is a cut in our contribution to the poorest of the poor in the world. Earlier this year I was part of a Select Committee whose Members visited the slums of Bombay. When one bears in mind areas of that type, one finds it beyond comprehension that we should now attempt to attack the overseas aid budget in this fashion. Not only is it beyond comprehension on an ordinary humane social international level, but it is beyond belief at a time when the UNCTAD has just completed its deli-berations—a forum in which all the relationships and tensions between the Third world and the industrial world were played out.

The Government should remember that the Third world is not without powers of its own. Its members control important raw materials. I refer not only to oil but to cobalt, which is enormously valuable and essential to our special steels industry. If the Third world sees the present economic policy pursued it will take action to defend itself—just as ordinary trade unionists and families in this country will take action to defend themselves against the savage policy of increasing indirect taxation and the pushing up of interest charges.

This is a squalid Budget. Its only effect will be to produce confrontation at home and contempt abroad.

9.3 p.m.

Mr. Denzil Davies (Llanelli)

This is the fourth or fifth occasion when I have had the pleasure of replying to a Budget debate on a Thursday. It is particularly pleasurable because although the audience is very small, it is very select. There is the additional genuine pleasure of having the opportunity to join in the congratulations to the nine maiden speakers. They all made first-class speeches. When I came to the House in 1970, I do not think that I would have had the skill or confidence to dare to speak in a Budget debate. One marvels at the skill with which all nine contributors presented their cases in terms of their constituencies and also made their individual contributions to this debate.

It would be invidious to single out any speech or to mention any constituency. Perhaps, on a personal basis, I could mention two former Members. I wish to refer to my former colleague in the Treasury, the ex-Member for Birkenhead, Edmund Dell. He was a distinguished Treasury Minister, and I had the great pleasure of working with him. He was a man of great intellectual honesty, objectivity and powerful analysis. Some times, in politics, that does not always help—as we know. Despite that and despite all the difficulties of trying to be as objective as possible, he retained his intellectual honesty. It was a great pleasure to work with him.

I should like to reiterate the remarks of my right hon. Friend the Member for Lewisham, East (Mr. Moyle) in relation to Sir Myer Galpern, who endeared himself to Treasury Ministers because of his ability to create brevity of speech among hon. Members. I am sure that the present Treasury Bench wishes that practice to continue from the Chair over the next few years, especially when they are struggling late at night with complicated Finance Bills as, no doubt, they will be doing.

In anticipation—if he catches your eye, Mr. Deputy Speaker—I should like to congratulate the hon. and learned Member for Dover and Deal (Mr. Rees) on his maiden speech as a member of the Government in a Budget debate. I have no doubt that we shall meet on numerous occasions at various hours of the night and day and continue the jousts that we had when he was in opposition.

I believe that the Budget is extremely damaging to the British economy. It makes no attempt to address itself to the real problems. It is solely a product of the dishonest and disreputable election campaign that was conducted by the Prime Minister and her Chancellor. It is an attempt—regardless of the consequences—to redeem an election pledge which should never have been made.

During the campaign, the Chancellor refused, when he was challenged about it, to detail the public expenditure cuts which would have to be made for the reductions in taxation. The reason that he gave was that he wanted to see the books. I had doubts about the validity of that answer. However, if that was true, he would also have had to see the books to determine income tax cuts. Time and again in the last Parliament we were told by Conservative Members that public expenditure was only one side of the balance sheet and that the other side was taxation which paid, in the main, for public expenditure. If the right hon. and learned Gentleman knew what was in the books—he should have known, in view of the vast plethora of statistics that emerge from Government, City analysts and various other bodies—it was irresponsible of him to promise income tax cuts. As a result, the Budget takes little account of the present state of the British economy.

The two most pressing problems facing the country, as has been the case for some time, are inflation and unemployment. The Budget deliberately makes both of these problems worse. Whatever the merits of income tax cuts—we have been debating those merits for some time —I do not believe that the Budget should be a debate about those merits. The question is whether the price which the Chancellor is paying for those income tax cuts is too high. I believe that it is. It is too high in terms of the higher prices that will have to be paid and in terms of the number of people who will be put out of work as a result of the Budget. The price is too high in terms of inflation and unemployment.

When I sat in the last Parliament listening to Conservative economic spokesmen, I had always thought that inflation was the worst evil facing the country. The hon. Member for Wolverhampton, South-west (Mr. Budgen) agrees that it is. It affects jobs and investment, and we were regaled with elegant speeches from Conservative Members about its effect on the very structure of democratic society. Inflation was and, in my opinion, remains the greatest evil.

We were constanly warned by Conservative Members of the dangers of inflation. Whenever there was a ¼ per cent. increase in the retail price index, the hon. Member for Blaby (Mr. Lawson), who is not here tonight, but who wound up for the Government last night, used to come out in blue spots. I see that the hon. Gentleman has just come into the Chamber. Let me repeat what I was saying. Whenever there was a slight increase in the retail price index, the hon. Member would have palpitations, get very upset and jump up and down.

The Prime Minister used to make stirring speeches when she was Leader of the Opposition, calling for a return to sound money. Indeed, she made a speech not long ago in which she almost brought tears to the eyes of Scottish Conservatives—no mean achievement—by referring to the need to return to sound money. The passage about sound money found its way into the Budget speech. Perhaps the right hon. Lady wrote that speech.

I do not want to incur the wrath of some Conservative Members, but I am not quite sure what is meant by "sound money". I gather that it has something to do with inflation and that one cannot have too much inflation and sound money at the same time—though I do not know what level of inflation is consistent with sound money. Perhaps we can probe that in the debates on the Finance Bill.

However, it is clear that a rate of inflation that will be 17½ per cent. in November and, as I believe, 20 per cent. by the end of December is not compatible with that mystical concept of sound money which the Tories were in favour of in opposition.

According to the Budget, inflation is not the main priority. Why otherwise would the Government have deliberately set out to increase it in the Budget by at least 5 per cent.—if one takes into account the effect of public expenditure cuts—and probably more? It seems that the Tory Party has again become the party of inflation.

Mr. Budgen

Does the right hon. Gentleman not agree that it is theoretically possible to increase the RPI while, at the same time, halting or slowing down the underlying prospective rate of inflation?

Mr. Davies

We shall come to that theoretical point in a moment, though it is highly theoretical.

In the Queen's Speech, the Government promised to fight inflation by fiscal and monetary means. I have no objection to that, but the Government have not done it in the Budget. They have not used fiscal and monetary means to fight inflation.

The fiscal side of the Budget, at least taxation—and I take it that taxation is included in the word "fiscal"—puts up prices and increases inflation. The fiscal side pulls in one direction in many ways and the monetary side is supposed to stop that inflation in the other direction.

The Chancellor of the Exchequer said that he intended to squeeze inflation out of the system, but he has shovelled more inflation into the system at one end and will try to use his monetary measures to squeeze out some of it at the other end. It is no good the hon. Member for Blaby shaking his head. The Government are giving monetarism a bad name.

As I understand it, controlling inflation by monetarism means that there must be sensible fiscal policies. It makes no sense when the Government's taxation policies increase inflation for them to try through monetary measures to reduce the rate of inflation, much of which they will have created themselves. There lies one of the fundamental pradoxes and contradictions of the Budget. Fiscal policy is, to some extent, pulling in one direction while monetary policy is trying to correct it in another direction.

There has been a certain amount of sophistry from Ministers trying to explain that an increase in the RPI as a result of indirect taxation is somehow different and that it is not really inflation at all. They try to suggest that if people have to pay tax of 15 per cent. on goods that previously attracted tax at 8 per cent., that is not really inflation, but something different.

It is an argument that the Opposition find difficult to understand. It is put in all sorts of different ways. It is said that this is a once-for-all increase in inflation. It may be a once-for-all increase, but in fact it is a gigantic step on to the moving staircase of inflation. What happens after that? Ministers do not know. They do not know whether the staircase will go faster or slow down, or whether this will be a one-step jump. They have no way of knowing, and that is too big a gamble to take in view of the inflationary pressures in the economy.

Then, of course, there is the attempt to downgrade the RPI as an indicator. Last night, the Financial Secretary gave the impression that the Government were looking around urgently for a less inconvenient or more malleable indicator of price rises. Somehow, the RPI was not quite right and we had to look for something slightly different. This is all part of the attempt that we have seen recently—whether it comes from the Minister of propaganda, the Paymaster-General, or from the Treasury—to downgrade the official statistics. The idea is conveyed that the RPI is not perhaps as important as we thought it was. No doubt the next attempt will be on the unemployment figures, with the suggestion that they do not reflect the true state of unemployment. Who knows but that sterling M3 is not after all an exact measure of money supply? There is clearly an attempt to downgrade these statistics because of the inconvenient results that they will produce.

The other justification of the VAT increase is that people have a choice. My hon. Friend the Member for Norwich, South (Mr. Garrett) dealt with that when he said that it was only the hermit who had the choice, because most people's patterns of spending were set and it was difficult for them to adjust, except in a very minor way, the choice of their spending.

The Chancellor is deluding himself if he thinks that by creating an inflation rate of 20 per cent. by the end of the year—which is what I think will happen—he will not have irresistible pressure on behalf of organised labour for high wage increases. We shall be back to the old familiar treadmill of higher wages chasing higher prices in an ever-increasing inflationary spiral, and the Government, having stoked the fires themselves, will not be able legitimately to complain about it.

Interest rates seem to have been exercising financial commentators and causing palpitations in the City in the last two or three days. The City was surprised when the minimum lending rate went up from 12 per cent. to 14 per cent. I do not know why it should have been surprised. If we have a Budget that is to create price rises and an inflation rate of almost 20 per cent. by the end of the year, we cannot have interest rates appreciably lower than the rate of inflation.

Whatever we might think about the public sector borrowing requirement, or about money supply and the beneficial effects of controlling it, at the end of the day it is inflationary expectations which will determine interest rates, and we cannot for very long—indeed, only for a short space of time—have a system of negative interest rates. We had such a system under Lord Barber, but we had positive interest rates under the Labour Government. The system of negative interest rates has its own dangers, and far from being too high at 14 per cent., the minimum lending rate should increase further if the inflationary expectations are leading up to 20 per cent. because that is the basis, at the end of the day, of how people lend money to the Government. They lend on the basis of inflationary expectation.

A side effect of this increase in interest rates has been the attraction of money to the country from abroad. I need not point out to the Government the dangers of that, both in terms of export competitiveness and in terms possibly of money supply, depending, of course, where the money goes.

The hon. Member for Blaby is furrowing his brow. I am sure that he appreciates very well that money coming from abroad can, depending on where it goes, make the money supply worse. That means more restrictions at home to prevent an increase in the money supply caused by money coming in from abroad, or possibly the pound will be allowed to appreciate, with problems and dangers for exports.

I now turn to the other side of the Budget—its effect on unemployment. There is no doubt that it will increase unemployment. I do not think that that is argued. Indeed, the Chief Secretary admitted it on radio or television the other night, being the honest man that he is.

For the past few months, unemployment has been on a downward trend. In view of the possibility of a recession in the world, I do not believe that, leaving aside this Budget, that trend would have continued. I think that from now on we should have faced unemployment again gradually rising, for reasons which in many ways are outside the control of any British Government.

That was the situation facing the Chancellor when he framed his Budget—on the one hand an inflationary position, with prices becoming worse, and, on the other, unemployment that was likely to become worse towards the end of the year. What he did was to introduce a Budget which will increase unemployment at a time of growing world recession. That again is why I say that the Budget is irresponsible, because it does not address itself to the real problems facing the British economy.

Perhaps it is too much to expect a Tory Chancellor of the Exchequer to try to insulate us from world recession and rising unemployment, but at least one expects a British Chancellor to try not to make the situation worse, as the Budget does. Unemployment will become worse, partly because of the cuts in public expenditure. I do not believe that they are minor cuts. They are not the major cuts that will come. The axe will be wielded before January by the Chief Secretary, aided most diligently by the hon. Member for Blaby.

The cuts are substantial. If we are to believe the Government's figures, they amount to about £1½ billion, and they will have an effect. What is also paradoxical about the Budget is that the cuts will increase unemployment. The inflationary effects of the Budget will increase public expenditure also, because of the indexation provision—we have heard from the Secretary of State for Social Services about the 17½ per cent. inflation—which is built into transfer payments. The cost of unemployment benefit will increase, in that there will be more benefits if more people are to be unemployed.

Therefore, current expenditure will be increased. When the Chief Secretary comes along with his axe in October or November for the public expendiutre review, he will have to cut capital expenditure more heavily. The position will become more lopsided than it is now, and I believe that it is already too lopsided as between capital expenditure and current expenditure. The Government are increasing current expenditure now by increasing prices and putting people on the dole. Therefore, capital expenditure will have to be cut more, with all the resultant effects on the economy.

The cuts in income tax will not create the corresponding boost in employment. As Treasury Ministers know—they have have been in the Treasury long enough to have been told this—£1 billion of public expenditure creates more employment in the short term. I do not know about the long term; I do not know where it is. Public expenditure of £1 billion is worth more in terms of employment than a cut of £1 billion in income tax, for the simple reason that part of the income tax cut—it may be 30 per cent., and it may be more—goes into savings, especially at a time of high inflaton, and 30 per cent. or more could go into imports. Therefore, the income tax cut cannot balance the unemployment effect of the public expenditure cuts in the Budget.

The public expenditure cuts will mean an increase in unemployment. But there will be an increase in unemployment for another reason. The increase in VAT to 15 per cent. will have a substantial effect on a number of manufacturing businesses, including small businesses. I believe that the small business will suffer more than the large business from the increase in VAT. The small businesses—manufacturers of boats, clothing and furniture—will find themselves under pressure.

Even worse, the service industries will suffer. For the service industries, the jump in many cases will have been from 8 per cent. to 15 per cent. The service sector has been the one sector of the British economy over the last 20 years that has shown considerable growth. Now the Government are hitting at the service sector and the small business sector by putting up VAT to 15 per cent., which will again create unemployment.

It is curious that this should be a bad Budget for the small business. Tory Ministers, when in Opposition, made speech after speech, night after night, about the need to encourage small businesses—a proposition with which we agree. But when the Tory Party gets into Government, it forgets the small business man and the small business. This Budget directly prejudices the small business man and the farmer by putting up VAT to 15 per cent., and by increasing MLR. Pressures will be put on small businesses which will not only jeopardise those businesses but create unemployment.

We are faced with a Budget that will increase inflation and create more unemployment. One has only to look again at the famous table 3 in the Red Book. I make no apology for going through it. What it shows is incredible. I know that hon. Members on the Government Benches do not believe in forecasts, but Mr. Nigel Lawson, Financial Secretary to the Treasury, has actually signed the Red Book.

Mr. Spencer Le Marchant (Comptroller of Her Majesty's Household)


Mr. Davies

Well, it says "Nigel Lawson, Treasury Chambers". Table 3 refers to "Economic Prospects to 1980". That is a poor heading for a start. It should be "Economic Non-prospects to 1980". The hon. Gentleman signed it and obviously must believe it. It shows gross domestic product at minus 1, consumers' expenditure at minus 1, Government expenditure at minus 2½, public corporations' fixed investment at minus 4½, private sector investment at minus ½, exports of goods and services at 5½, which is very optimistic, stockbuilding at minus ½, and imports 1, which is the usual Treasury optimism.

For manufacturing production, most important of all under this incentive Budget, setting the people free from income tax and ensuring the chance for entrepreneurs to set up their own businesses, the figure is minus 2½. That is the figure for this radical reforming Budget, this new beginning.

On top of this, I must tell the House, Tom Jones is not coming home. New hon. Members will not appreciate the allusion to Tom Jones, but I recall sitting on the Treasury Bench listening to an eloquent speech by the Chancellor, on the Opposition side, bemoaning the fact that our high taxation system was making poor Tom Jones languish on the beaches of California. Tom Jones, apparently, is still not coming home as a result of this Budget.

The Budget will not work. It has too many inherent contradictions. When, over the next 12 months, it is seen to have failed, other Tory panaceas will be trailed on to the stage. One can see them now. They will include heavier cuts in public expenditure, which we have been promised, a heavier dose of monetarism and an attempt to get the pound down by raising portfolio investment abroad because it is getting too high and the flows may reduce its value. There will possibly be an attempted devaluation into the EMS. All these panaceas will be trotted on to the stage and all will fail. Perhaps, at the end of the day, there will be an emergency Cabinet meeting when wage freezes and suchlike will be trundled out.

The Budget is economically bad and socially unfair. The Tory Party will eventually pay a heavy price for the Budget at the polls. In the meantime, unfortunately, the British people are already paying that heavy price.

9.30 p.m.

The Minister of State, Treasury (Mr. Peter-Rees)

We have had an agreeable and civilised debate on an important Budget. I disregard for the moment the characterisation of it by the right hon. Member for Llanelli (Mr. Davies) as a bad Budget. Today's debate has been distinguished by a large number of maiden speeches of verve, elegance, eloquence and sincerity. I hope that I list them all accurately in saying that there have been speeches from my hon. Friends the Members for Newark (Mr. Alexander), Nelson and Colne (Mr. Lee), Preston, North (Mr. Atkins), Bath (Mr. Patten) and Belper (Mrs. Faith); and from the hon. Members for Wood Green (Mr. Race), Glasgow, Shettleston (Mr. Marshall), Birkenhead (Mr. Field) and Hammersmith, North (Mr. Soley).

I hope that they will forgive me if I do not follow the verbal tours that they made of their constituencies. I was utterly persuaded of the charms of those constituencies. Time alone forbids me to follow them verbally, although I hope to do so physically in due course.

One or two maiden speakers perhaps broke the accepted canon that their speeches should not be controversial. I do not believe that we should observe that canon too strictly. We listened with silent admiration to their self-confidence. However, they should be put on notice that on subsequent occasions they must prepare themselves for a more robust approach.

In particular, we will have noticed and regretted an entirely unprovoked attack on my right hon. Friend the Member for Daventry (Mr. Prentice), who I do not believe deserved that. The hon. Member who made that attack will, I think, live to regret it. Although we listened to him in silence on this occasion, on future occasions we certainly shall not.

This is an important debate since it is a debate on the first of many Budgets which I hope my right hon. and learned Friend the Chancellor will introduce. It is a Budget which I dare say will be remembered for initiating a sustained programme of tax reform. Against that background, I had hoped that we could establish that both Government and Opposition shared to a degree the objective of cutting the burden of direct taxation and introducing some sense into our fiscal system.

I regret very much that the right hon. Member for Llanelli, whose speech, as always, I enjoyed for its eloquence and charm, did not repeat the words that he used on 25th November 1977. Most of us will remember them, but for the benefit of my hon. Friends and other hon. Members who were not in the House at the time perhaps I may repeat them. The right hon. Gentleman said. Let me … make it clear that this Government"— the previous Administration— believe that the levels of direct taxation and certainly the marginal rates at every level of income are too high and that it is our intention to reduce the level of taxation in that regard. I believe that the tax profile"— a very attractive phrase— if I may put it in that shorthand way, is not a very sensible one in the light of our needs as a country, our need to attract foreign investment and our need for the economy to grow."—[Official Report, 25 November 1977; Vol. 939, c. 2028.] How well and how sensibly put.

Mr. Denzil Davies

Indeed, and if the hon. and learned Gentleman had been listening to my speech just now he would know that I made it clear that I was not arguing against the income tax cuts in themselves. I was saying that the price was far too high in this Budget, in terms of high inflation. There were greater priorities than merely income tax cuts. That is all that I was trying to argue.

Mr. Rees

I hope that, as always, I paid the closest attention to the right hon. Gentleman's speech. It was carefully argued, and he is only six weeks away—I was grateful for his congratulations to me—from the enormous resources of human and intellectual talent which are concentrated in the Treasury. He will remember the well-argued briefs which must have been pressed into his hand, which no doubt he put to good use in our debates.

Even if Labour Members have changed their ground in opposition—it is not un-usual for Oppositions to change their ground just a little, perhaps some parties more than others—they cannot entirely ignore the results of the general election, much though they may like to do so. One hon. Member, I think, said that we must not "preen ourselves" on the results of the election.

I approach our inheritance and the prospects facing us with considerable humility, and many doubts and reservations. It is absolutely right to make that clear. I certainly do not approach our inheritance and what we must do to re-cover it, to improve it, with overweening self-confidence, as I hope to make clear.

The party which I am proud to represent fought the general election on several issues. The right hon. Member for Llanelli, with uncharacteristic harshness, accused the Prime Minister of fighting on a dishonest ticket. I do not believe that to be true. We are utterly candid with the electorate.

The issue which counted in my humble campaign in Dover and Deal was that the weight of taxation had become intolerable and that it should be lightened by a sustained programme of cuts in public expenditure and by a shift to direct taxation.

I have never attached much weight to the sanctity of party manifestos. I suspect that they are read only by politicians, civil servants and the political press. I am not sure that that view applies to members of the Labour Party who feel bound by the sancrosanctity of what is produced for them by Transport House. I do not wish to venture on to that contentious ground, but the British people on 3 May voted clearly and convincingly for a programme of sustained cuts in direct taxation. Indeed, The Guardian and the Daily Mirror, which are not newspapers with a Conservative bias, recognised that in their editorials on the Budget.

Mr. Orme

What about what The Guardian said today?

Mr. Rees

The right hon. Gentleman may not pay as much regard to those newspapers as I. I like to know what the intellectual mentors of right hon. and hon. Members of the Labour Party are thinking.

Mr. Orme

Perhaps the hon. and learned Gentleman would like to tell us what The Guardian editorial said today about the speech by the Secretary of State for Social Services.

Mr. Rees

The right hon. Gentleman is too old a parliamentary hand to expect me to defend someone of such incredible experience and verbal dexterity as my right hon. Friend the Secretary of State. I listened with amusement to the exchanges between my right hon. Friend and the Opposition Front Bench earlier. The House will decide who had the better of those exchanges.

If we start the debate from the premise that the British people voted for substantial cuts in direct taxation, there are two questions which are the legitimate subject of controversy. Without being patronising, I compliment my hon. Friend the Member for Bath and the hon. Member for Birkenhead. This is the way in which they approached this problem.

The two questions are, first, how can the Government achieve these cuts and, secondly, in which areas should the tax cuts be concentrated? In his characteristically robust approach, the right hon. Member for Salford, West (Mr. Orme) disregarded that. He went baldheaded for my right hon. Friend the Secretary of State. He crumpled one of his horns, if not both, on my right hon. Friend's invincible armour.

I shall not take up the detailed points because there will be other opportunities, but one of the arguments of the right hon. Member for Salford, West was significant. He suggested that this Government have deliberately created inflation of between 16 per cent. and 17½ per cent. At least 10 per cent. of that inflation is certainly not the responsibility of this Government.

These were the underlying trends which we inherited. The right hon. Member for Llanelli in a candid speech—the right hon. Member is noted for his candour and charm—admitted as much. We do not have to make the case about our inheritance because he did it for us. We inherited rising inflationary trends and a difficult employment position. Let us at least find common ground on that.

In a once-for-all way we have added to that by 3.8 per cent. because of our package of indirect tax increases. But let me remind the House of the reverse situation. In the summer of 1974, for reasons about which I hardly dare speculate at this distance of time, the then Chancellor of the Exchequer cut the rate of VAT from 10 per cent. to 8 per cent., and he went to the polls boasting of the dramatic impact he had made on the RPI. I remind the House that at certain points when we grew a little heated we described him as "Mr. 8.4 per cent." What good did that do the British people in the long run? The next year the rate of inflation was up to 29 per cent.

Let us express any reservation we like about the Red Book. I listened with interest to the eloquent speech of my hon. Friend the Member for Horsham and Crawley (Mr. Hordern). It is not perhaps for me as a new incumbent to the Treasury to express any views about the Red Book, but at least let us extrapolate the figures. There is a possibility that the rate of inflation will come down to 13 per cent. I do not believe that the right hon. Member for Llanelli—and I know that he was not in the Treasury at that time—can look back with any pride at what was done in the summer of 1974. Let me reassure the right hon. Member for Salford, West than we are not out deliberately to increase the inflationary trend. We believe that possibly a once-for-all increase of 3.8 per cent. is a price that the British people will in the long run be prepared to pay for the cuts in direct taxation which we are introducing.

The right hon. Member for Norwich, North (Mr. Ennals) gave us the privilege of his valedictory address yesterday and, as he charmingly chose to phrase it, his maiden speech today. I hope that he will forgive me if I do not follow him in detail because there are many points of a more general economic and budgetary significance with which I wish to deal. We noted his points. He concentrated on the effects on the National Health Service. It is not for me to intervene in the debates on his administrative competence between himself and the right hon. Member for Huyton (Sir H. Wilson). However, under the new stewardship of my right hon. Friend the Secretary of State for Social Services I am quite sure that the National Health Service will be able to accommodate the cash limits, because they are not in the true sense cuts, and will be able to provide an equally good, if not better, service to the people of this country.

Mr. Ennals

I am grateful to the Minister of State for his courteous remarks about my speech, but he has made no attempt to answer the crucial question that I put. What will be the effect on the resources available to the National Health Service of a combination of an admitted 17½ per cent. inflation rate and an adherence to the cash limits as set in January this year? I should have thought that the Minister of State would at least have been able to answer that question, because it is not just I who wants to know the answer.

Mr. Rees

The right hon. Gentleman will know, with his great expertise and experience of these matters, that unadjusted cash limits will apply to only 30 per cent. of the National Health Service—

Mr. Ennals

But that is £2 billion.

Mr. Rees

I appreciate that, but not every service provided or every item of goods bought by the Health Service will be affected by the increase in VAT. The right hon. Gentleman asked four questions, but he will know that at this time it is impossible to give him precise answers. I believe that under the wise stewardship of my right hon. Friend it will be possible for the National Health Service, which is a good deal more flexible than the right hon. Gentleman ever realised during his five years of office, to sustain these cuts.

The right hon. Member for Llanelli should have been a bit more forthcoming to the House, because he told us that this was a bad Budget. This is the small change of debate. We have had cause to speculate over the past four or five weeks what kind of Budget he and his right hon. Friends might have introduced had they been privileged to sit on this side of the House.

Mr. Denzil Davies


Mr. Rees

The right hon. Gentleman should contain himself for a moment because if we are comparing the performance of Governments and parties let us see what options are open to the Government. Let us see, against the background of the situation which the present Government inherited, what another Government, with perhaps different priorities, would have achieved. I am sure that the right hon. Gentleman will confirm, as was confirmed by his right hon. Friend the Member for Leeds, East (Mr. Healey), that it was the firm intention of the previous Administration to have a public sector borrowing requirement of £8.5 billion this year.

Could not the right hon. Gentleman therefore applaud the aim of my right hon. and learned Friend, established by figures—and we can perhaps have some slight reservations because we know the margin of errors—to have the public sector borrowing requirement of £8.25 billion? In view of that background and the fact, which I am sure that the right hon. Gentleman will admit, that their programmes, if unchanged, probably would have resulted in a public sector borrowing requirement of £10.5 billion, and if we add to that the 57 specific commitments in their manifesto and the commitment now being dredged out, to increase child benefits, Ministers would have had to find a fairly considerable sum of money.

While I am on the question of child benefit, since it exercised, and perhaps rightly exercised, hon. and right hon. Gentlemen opposite, I remind them that as late as 3 April this year the right hon. Member for Leeds, East was uncertain as to how much those increases would be. I hope that the House will forgive me if I read the passage in his speech of 3 April: What I can tell the House is that the Government had planned a further increase in the child benefit next November. There is a great advantage, incidentally, in increasing the child benefit at the same time as most other benefits are increased in the year. However, they chose to do it in April this year. I do not blame them for that. The right hon. Gentleman continued: However, I do not think that it would be right to tell the House on this occasion precisely by how much child benefit would be increased in November. That is still a matter for consideration."—[Official Report, 3 April 1979; Vol. 965, c. 1196.] I do not think that the right hon. Member for Norwich, North and the right hon. Member for Leeds, East could have been at the same Cabinet meeting because it is quite clear that as late as 3 April the matter had not been determined. The right hon. Gentleman ought to have explained to us—and it only goes to the mathematics of the position—how he would have found, say, another £2.5 billion. Would it have been by an increase in excise duty?

Mr. Denzil Davies

There is no secret about it. A Labour Chancellor—and it would have been a difficult Budget for him as it was for the present Chancellor—would not have gone for the substantial cuts in income tax which the Government have gone for. For that reason, we would not have been in the position of creating more inflation and more unemployment which this Budget has done. That would have been the difference because, as I said in my speech, the price to us would have been too high. To the Government, apparently, it is not too high. The Government are prepared to wear the inflation and the unemployment.

Mr. Rees

There we have it. That is the fundamental difference between the two parties. That is why I believe that the British people voted for the Conservative Party and for a Conservative Government. There, in a short sentence, the right hon. Gentleman has demonstrated the inhibitions and the constraints, which were very largely built up by the right hon. Gentleman and his right hon. Friends. That is why they could not move in any particular direction and why, although they had been mouthing for years about the desirability of tax cuts, at the crunch, on every occasion, they flinched from them. That is the difference between this Government and the previous Administration because we have at least had the courage to take some hard and tough decisions. We recognise and the country will recognise that they were hard and tough decisions, but at the end of the day—they will come, not this year, or perhaps even next year, but over the life of the Parliament—people will recognise that there are benefits, that they were worth waiting for and were worth paying for.

The right hon. Gentleman has been suitably modest about the increases in VAT, and rightly so, because he knows, as we do, that VAT is not in fact as regressive as some of his hon. Friends would pretend. Indeed, I remind the right hon. Gentleman that his right hon. Friend the Member for Heywood and Royton (Mr. Barnett), then Chief Secretary, and his right hon. Friend the Member for Leeds, East, then Chancellor of the Exchequer, both admitted that. Indeed, as far back as 1972, when we were debating the introduction of VAT, the right hon. Member for Leeds, East recognised that the scope and spread of VAT is such that it is nothing like as regressive as some of his hon. Friends would pretend.

There are so many quotations that one can make, but I take just this one from what the right hon. Member for Leeds, East said on the programme "Analysis" on Radio 4 in October 1976. In answer to a questioner he said that he believed in freedom of choice. I agree"— he said— and I would like to see very much a shift from direct to indirect taxation. I think in recent years the balance has swung in the wrong direction. But somehow never over the past five years was it ever the right moment to swing it back.

This is what the right hon. Member for Llanelli has very candidly admitted to-day, that if he had been standing in my shoes he would have been producing or justifying a quite different Budget—not a standstill Budget, but he would have had to increase some indirect taxes, and this is perhaps where he has not been entirely forthcoming with the House. To cover the 57 different commitments, to cover the increase in child benefits, to bring the public sector borrowing requirment down to £8½ billion, he would have had to find £2 billion.

What would the right hon. Gentleman have done? It might have been an ACT surcharge. We all know the impact that that would make on the cash flow of companies. That would not have been very good for the economy, and it would not have been very good for employment, would it? Or it might have been the employers' surcharge. We all know that that works through into costs—not immediately, of course, and that is why it was much resorted to by the last Labour Government, but it does eventually work through, and it cannot be rebated for exports in the way that VAT is.

But, beyond that, neither of those would have been sufficient, at the end of the day Labour Ministers, if they had been in office, would probably have resorted to a revalorisation of excise duties. But that, too, would have had its impact on the RPI.

We have taken a tough decision and—I hope the House will agree—a bold decision, but we believe that we have brought something with it to the British people. We have brought some very considerable reductions in direct taxation. I wish to emphasise—since no hon. Member on the Opposition Benches has chosen to emphasise—the scope of these tax cuts and the advantages that we hope to achieve.

Mr. Orme

It is about time we heard of some.

Mr. Rees

Exactly—let us go out and robustly defend what we are doing. I am glad that the right hon. Gentleman recog- nises what we are about. Let him just give me time. There will be time also for my right hon. and learned Friend on Monday. We shall be able to come back to these matters also on the Second Reading of the Finance Bill. The right hon. Gentleman need not feel cheated. We shall be exploring these matters in depth over the summer, and because this is only the first of a series of tax-cutting Budgets the right hon. Gentleman will have plenty of scope to bandy words with me across the Table—assuming, of course, that the electoral processes on his side entrust him with high Shadow office, as I hope they will.

Let us look at the thresholds. What we have proposed is not merely that the thresholds should keep pace with inflation. We propose that they should be double that. I wish that the hon. Member for Birmingham, Perry Barr (Mr. Rooker) were in the Chamber tonight. He would have been pleased at that. I wish that Mrs. Wise, if for that reason alone, were in the House also, for she could have joined with us in applauding these particular increases. [HON. MEMBERS: "No."] Well, perhaps I am getting carried a little too far for some of my hon. Friends. But hon. Members on the Opposition Benches might ponder on the number of pensioners who will be taken out of tax and the 1,300,000 people who will no longer be paying tax.

The right hon. Gentleman spoke of a widow who would get a tax cut of only £1.45, but would she have got any tax cut at all in a Budget introduced by his right hon. Friend the Member for Leeds, East? I doubt it. She may not be happy about increased VAT in the short run, but she will find that she has got at least something to show for it, while under the previous Government, if they had continued with their policies, she would have had nothing. We have brought back the basic rate of income tax to 30 per cent., where we left it in 1973–74. My right hon. and learned Friend the Chancellor of the Exchequer has stated that we intend to move to a rate of 25 per cent. I know that the Liberal Party wishes to outbid us on that score. I am sorry that Mr. John Pardoe is no longer in this place to witness the way in which we are moving. He was an agreeable and engaging person. We all had our differences with him, but I leave that there.

When we reduced the higher rates of income tax, it was inevitable that some Labour Members would suggest that it was a rich man's Budget.

Mr. Orme

Absolutely, yes.

Mr. Rees

I wonder whether the right hon. Gentleman remembers what his good friend—a good friend of everyone in the House—the former right hon. Member for Manchester Central, Mr. Harold Lever, said in April 1978. I wish Harold Lever well in another place, although we shall miss his civilised and agreeable contributions to our debates. I hope that he will not attract the severe censure of the right hon. Member for Bristol, South-East (Mr. Benn) for his acceptance of a peerage. That is a domestic matter that I shall not touch on further. We recall that in "Weekend World", on 23 April 1978, Mr. Lever said: The rate of tax on salaried talent is very high in this country … the putting of this right is a massive problem that will take a little time and I believe this to be a No. 1 priority in the Chancellor's mind for future action—that's my own view; it ought to be … I must be frank and say that many of these taxes owe more to judgment of an egalitarian kind than an economic kind … my own view is that a correction is now overdue and I think we will see one. Mr. Lever was right, but he had to wait for a Conservative Administration to make the correction. How I wish that he were still in the House to add all the weight of his experience and good sense to our efforts.

The cuts in the Budget are substantial. I hope that it will be recognised that they are designed to increase incentives at every income level and make it more worth while to work. I know that the right hon. Member for Down, South (Mr. Powell) disagrees about that. I take some comfort from the fact that his successor in Wolverhampton, my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen), takes a slightly different view. It may be that the right hon. Gentleman, since he has moved to the pastoral glades of Down, South, has adopted a different view.

The Government believe that this is an incentive Budget. We believe that over-all practically the whole of the taxpaying population will find itself better off. That will be found, first, in July when the first tax reductions are made. Secondly, tax- payers will notice that they are better off in October when their PAYE is recoded. Schedule D taxpayers will note that they are better off when, in January, they have to pay their first instalment of tax for the year.

Perhaps the best commentary on the tax regime that we have inherited and wish to transform is the evidence of the chairman of the Board of Inland Revenue to a Select Committee. He suggested that the black or hidden economy might be run at the rate of £9 billion a year, and that the revenue lost might be as much as £2 billion to £3 billion. What a commentary on the past five years. Labour Members, especially those who show obsessive concern with the problems of tax avoidance and evasion, might reflect that indirect tax might be a better way of siphoning off some of the profits than direct taxation.

The Leader of the Opposition said, in a rather lack-lustre speech on Tuesday, that the Budget is a gamble. Of course it is a gamble. There are no certainties in politics. It is trite almost to make that remark. What he and his right hon. and hon. Friends have not grasped is that it is a gamble on the nature and responsiveness of the British people.

We believe that the Budget will create a fresh climate to which the British people will respond, not all at once perhaps, but over the lifetime of a Parliament. We want no more mosaic tablets brought down from the Sinai of Transport House. The laws that those tablets propounded were not in sympathy with the aspirations and deepest sentiments of the British people. Indeed, they crumbled to dust in the hands of the right hon. Gentleman and his hon. Friends.

The right hon. Gentleman and his hon. Friends apparently do not trust the British people. Government supporters do. We believe that, in the altered climate that we have created by this Budget—which we shall improve on in subsequent Budgets—there is a chance that we shall turn round the economy of this country. On that relatively modest basis, on the basis that there is a chance—

It being Ten o'clock, the debate stood adjourned.

Debate to be resumed upon Monday next.