Commons Sitting of 27 March 1980

Preamble
The House met at half-past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRIVATE BUSINESS
  BRITISH RAILWAYS BILL (By Order)

    DARTMOOR COMMONS BILL [Lords] (By Order)
    Orders for Second Reading read.
    To be read a Second time upon Tuesday next.

ORAL ANSWERS TO QUESTIONS
  HOME DEPARTMENT

    Metropolitan Police
    Mr. Cyril D. Townsendasked the Secretary of State for the Home Department when he expects the Metropolitan Police to reach its full establishment and when that establishment was agreed and last reviewed.
    The Minister of State, Home Office (Mr. Leon Britian): The force strength has increased by over 900 since the publication of the Edmund-Davies report in July 1978, but is still some 4,000 below establishment. It is not possible to say when the Metropolitan Police will reach full establishment, but it is likely to be some years before it is achieved. The last major review of establishment was in 1965.
    Mr. Townsend: Is my hon. and learned Friend aware that he has given an encouraging reply? The increase in police strength is no doubt partly due to the wise decision of the Government to allocate a 2½ per cent. increase to the forces of law and order. Is my hon. and learned Friend satisfied that the Metropolitan Police is adequately deploying those it has on its strength?
    Mr. Brittan: I am grateful to my hon. Friend for his first remarks. On police deployment, there has been a review of local policing arrangements by the Commissioner. As a result, I am pleased to be able to tell the House that as many as 1,200 officers should be redeployed from administrative duties. That is a very satisfactory outcome.
    Mr. George Cunningham: Will the Minister make sure that when the Commissioner intends to close local police stations—as he does so intend—there is the fullest consultation with borough councils in the London area? There is great concern among people about the closing down of what they regard as their local police station.
    Mr. Brittan: I know that there is concern when this happens. It is a matter for the Commissioner. I know that he is anxious that there should be full consultation and discussion before proceeding with any such proposals.

    Television Signals (Retransmission)
    Mr. John MacKayasked the Secretary of State for the Home Department what stage has been reached in deciding policy regarding the retransmission of television signals which would enable isolated, scattered communities to receive television; and if he will make a statement.
    The Minister of State, Home Office (Mr. Timothy Raison): We are considering with the broadcasting authorities possible arrangements for assessing the suitability of proposals for self-help schemes taking account of the UHF services already provided or planned in the area. My right hon. Friend hopes to make an announcement shortly.
    Mr. MacKay: I thank my hon. Friend for that reply. I hope that the announcement will not be too long delayed. Does my hon. Friend realise that in many mountainous areas, including my constituency, this kind of active deflector system offers the only hope for receiving television? Those people would be grateful for a favourable reply from the Minister.
    Mr. Raison: I understand the importance that my hon. Friend attaches to these schemes. But the Government need to be clear on resources and the technical

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    implications of the whole future policy for extending 625 line UHF coverage in this way. Available resources must be applied to the best effect.
    Mr. Hill: May I bring to my hon. Friend's attention a problem, not in an isolated area but in Southampton, one of the major cities? There is poor reception in all the areas surrounding the container port. The trouble is, obviously, the shadow of the container cranes. I have been trying for some years to get a solution. Can I call on my hon. Friend for help?
    Mr. Raison: That is another question. I shall write to my hon. Friend about it.

    British Broadcasting Corporation
    Mr. Canavanasked the Secretary of State for the Home Department when he expects next to meet the chairman of the British Broadcasting Corporation.
    Mr. Michael McNair-Wilsonasked the Secretary of State for the Home Department when he expects next to meet the chairman of the board of governors of the British Broadcasting Corporation.
    Mr. Parryasked the Secretary of State for the Home Department if he has any plans to meet the chairman of the British Broadcasting Corporation.
    Mr. Bestasked the Secretary of State for the Home Department when he intends next to meet the chairman of the board of governors of the British Broadcasting Corporation.
    The Secretary of State for the Home Department (Mr. William Whitelaw): I have no immediate plans to meet the chairman of the board of governors of the BBC.
    Mr. Canavan: When the right hon. Gentleman gets round to meeting the chairman, will he explain that there is widespread concern in Scotland about the possible scrapping of the BBC Scottish symphony orchestra and, also, the schools broadcasting service in Scotland? Will the Secretary of State ensure that the BBC gets enough money from the Government to continue these services, which are so important for the educational and cultural life of Scotland?
    Mr. Whitelaw: I do not believe that
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    words are needed from me to explain to the chairman of the governors of the BBC the strong feelings that have properly been expressed in different parts of the country about the BBC's proposals to cut its expenditure.
    The exact decisons—which have not yet been made—are, of course, a matter for the governors and not a matter in which I could, or should, in any way intervene.
    The hon. Gentleman, and others, should remember that when I raised the colour television licence fee from £25 to £34 there was an increase of some 36 per cent. for the two years. Interestingly enough, I did not hear many voices raised in the House at that time suggesting that I should put the licence fee any higher.
    Mr. McNair-Wilson: When my right hon. Friend next meets the chairman of the BBC governors will he express the growing disquiet about the lack of factual balance in a good number of BBC current affairs programmes where the object appears to be to put some organisation in the dock such as our security forces in Northern Ireland, the Thames Water Authority, the Atomic Weapons Research Establishment at Aldermaston and more recently the Army in the programme "Gone for a Soldier"?
    Will my right hon. Friend say to the chairman that the dictum that the BBC now appears to be following whereby controversy is considered more important than responsibility is not good enough?
    Mr. Whitelaw: These are matters for the governors of the BBC. Rightly, with the independent broadcasting arrangements such as we have—arrangements which I feel are right—they must make their decisions on balance and on taste. It is right for the House to express its views as forcefully as hon. Members wish to the BBC governors and it is absolutely open to the different parties to express their views—as they do—about balance to the BBC. That is the right way to proceed.
    The constitutional position, that the Home Secretary, who is responsible for the broadcasting authorities, should not express a personal view or a view on behalf of the Government, is right. Equally, I am entitled to say to the House that I have noticed very plainly the views that

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    have been expressed. I know that those views are appreciated by the governors of the BBC and they arc the people who must act in these matters.
    Mr. Best: Does not my right hon. Friend agree that there is another programme to be added to the alarming list mentioned by my hon. Friend the Member for Newbury (Mr. McNair-Wilson)? That was the recent Nationwide programme on arsonists in Wales. Does my right hon. Friend agree that a heavy burden of responsibility lies upon those whose ultimate charge it is to transmit such programmes to show a degree of investigative journalism and check the veracity of the facts put across? Otherwise such programmes can only be alarmist and do damage to the general public.
    Mr. Whitelaw: I appreciate the feelings of my hon. Friend and many of those who are concerned about this particular matter. Strong views have rightly been expressed to the chairman of the BBC governors and I noticed in the newspapers that he sought to reply. Further discussions have continued. I believe that it is essential that we in this House, while expressing our views strongly to the governors of the BBC, must respect their independent position and leave them to make the final decisions.
    Mr. Armstrong: Does the Home Secretary realise that many of us feel that it is his duty and responsibility to back up the chairman of the BBC governors in defending a public service that is independent of private sources of income? Does he further appreciate that any deterioration in the quality of BBC services to the Northern region will be regarded with great resentment? We have been the Cinderella for far too long. If there is any interference with the Mike Neville programme, there will be a rebellion in the Northern region.
    Mr. Whitelaw: I am grateful to the right hon. Gentleman. I did not think that I was doing too badly in the course that he set me. I thought that I was making it clear that I would certainly not pass any judgment on what the chairman of the governors of the BBC did or on what the BBC did. That is a matter for them. In taking that course I am taking the course followed by every Home Secretary in the past. It is the right course.
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    I certainly support the BBC, though I cannot, as an individual, be expected to support everything that the BBC does. Nor would the BBC expect me to do so. The Government strongly support the BBC, and I, as the Minister in charge of broadcasting, strongly support having an independent broadcasting authority in this country. We have one. We are entitled to criticise it as hard as we can, but we must respect its independence.
    Mr. Farr: In view of the requests that have been made to him today, will my right hon. Friend see the director-general of the BBC urgently and call his attention to the disquiet felt by many hon. Members about the way in which late evening programmes put out by the BBC have deteriorated in recent months? There has been a big increase in the screening of low quality, pornographic and second-rate material.
    Mr. Whitelaw: I note what my hon. Friend says. I see the chairman of the governors from time to time. I have no plans to see him at the moment, but he will be well informed about feelings on these matters when I next see him. Of course I am prepared—I am expected —to discuss these issues with him.
    Mr. Merlyn Rees: Will the right hon. Gentleman say whether the BBC financial presentation to the Home Office in preparation for the licence fee increase included a general indication that cuts were to be made in orchestras, education and local broadcasting? Arising out of that, is there not a way—since the BBC provides these excellent orchestras as a public service—in which the IBA could contribute some money to BBC resources so that the orchestras could be maintained?
    Mr. Whitelaw: I am grateful to the right hon. Gentleman. When the BBC made its presentation to us it properly made that presentation on the financial facts as a whole. Naturally, what it decides to do with the money it receives through the licence fee must be a matter for the BBC. As the right hon. Gentleman will appreciate, it is not for the Home Office to question how the BBC distributes its resources. Therefore, the BBC did not make that point. The provision of funds by the IBA and others to support the BBC orchestras is another matter, but it is fair to consider it.
    Mr. Beith: Does the Home Secretary agree—as the chairman of the BBC govenors seemed to agree when I last put it to him—that part of the BBC's public service obligation is to provide at least some form of local news and weather information on radio? Is the Home Secretary aware that in north Northumberland the BBC proposes to remove all the regional VHF radio bulletins although we have no local radio alternative?
    Mr. Whitelaw: I was not aware of that. Coming from the same region—though from the other side of the Pennines—no doubt I ought to have been aware that that was happening in Northumbria. It was probably happening in Cumbria, too. But nobody has yet told me that it is happening.
    Nevertheless, I agree with the hon. Gentleman that those of us who live far from London should have reasonable local services. I know that that is also the strongly held view of the BBC. Obviously, when the hon. Gentleman tells me of something about which the chairman of the BBC governors is inclined to agree it would be dangerous for me to assume that that was actually what the chairman of the governors was doing. That must remain a matter between the chairman of the governors and the hon. Gentleman.

    Penal System (May Report Recommendations)
    Mr. Dubsasked the Secretary of State for the Home Department if he is now in a position to announce his proposals on the recommendations in the May report on the penal system.
    Mr. Whitelaw: I hope to announce decisions on the recommendations of the May committee on Home Office organisation after Easter.
    Mr. Dubs: Does the Home Secretary accept that his recently stated views on the need to reduce the prison population are widely welcomed? Does he also accept not only the urgency of a debate in the House but the need for quick action in order to contain the growing crisis in our prison system?
    Mr. Whitelaw: I appreciate what the hon. Gentleman says. I wish the nation as a whole—and as a first step the House —to appreciate some of the problems inside our prisons. Those problems, if I may
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    say so, over many years, have been too little appreciated by hon. Members.
    I have plans which I hope will help but I do not accept that they will help as emergency measures. I hope that it will be necessary to take not emergency measures but measures which will have a clear effect. However, emergency measures can never be ruled out, though I hope that they will not have to be taken.
    Mr. Edward Gardner: Does my right hon. Friend agree that the only fully effective way of reducing the present critically large prison population is to use prison sentences for serious—and in particular violent—crimes only and to use alternative punishments for other offenders where it is possible?
    Mr. Whitelaw: I agree with my hon. and learned Friend. I have, as I think the House will appreciate, been a strong advocate of non-custodial sentences wherever possible, particularly for non-violent offenders. I will continue to stand for that principle since I am quite certain that it is in the interests of the nation. As my hon. and learned Friend will be the first to appreciate, in cases involving non-violent offenders shorter sentences—where thought appropriate by those administering them—would be valuable. In view of what some newspapers seem to say from time to time, that must be a matter for those who impose the sentences. It cannot he a matter for the Home Secretary.
    Dr. Summerskill: Will the Home Secretary bear in mind that he first announced proposals for his short, sharp, shock regime to the Conservative Party conference? Is he aware that last Friday he announced his preliminary proposals for prison reform to the Central Council of the National Union of Conservative and Unionist Associations? We may be a less appreciative audience, but will the right hon. Gentleman in future announce his proposals to the House, because hon. Members eagerly await a statement?
    Mr. Whitelaw: The hon. Lady makes a fair point. When I announced the proposals I had no responsibility, because at that time I was in opposition. When one is in opposition surely one is entitled to make statements outside the House, because one does not always hate the

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    opportunity to announce proposals to the House first.
    Dr. Summerskill: I am not speaking of when the right hon. Gentleman was in opposition.
    Mr. Whitelaw: The hon. Lady referred to my proposals for a short, sharp shock. I announced those during a by-election campaign in Birmingham when I was in opposition. I am not as good as some at remembering exact dates. I do not wish to be discourteous and I accept that I gave details to the Conservative Party conference. If I did wrong, I understand how the House might feel.
    I made a general statement about prisons. I was not describing the detailed proposals for organisation which I have now promised. They will be more extensive. The hon. Lady thinks that I had an appreciative audience when discussing prisons. She should have heard and seen the audience. I do not think that it was all that appreciative of a speech by me about prisons.
    Mr. Speaker: Order. With respect, it might be my fancy, but it seems that answers are becoming longer.
    Mr. Lawrence: As the prison population becomes more obvious and more alarming, should not the credit that the House pays to the prison officers for the splendid work that they do grow?
    Mr. Whitelaw: I entirely agree with my hon. Friend.
    Mr. Kilroy-Silk: Will the Home Secretary continue his welcome positive and constructive approach by reminding the House and the country that the annual cost of keeping a person in prison is £5,894, compared with the annual cost of £250 for probation supervision, £350 for a community service order and £31 for an attendance centre order? Does that not demonstrate the efficiency of the non-custodial solution? Will he continue to place the emphasis on that in order to reduce the cost of the prison service?
    Mr. Whitelaw: The hon. Gentleman will not expect me always to be grateful for his interventions, but on this occasion I am grateful to him and, rather exceptionally, I entirely agree with him.

    Rural policing
    Mr. Gummerasked the Secretary of State for the Home Department what discussions he has had with the chief constables of England and Wales about rural policing.
    Mr. Brittan: We are concerned to encourage the development and interchange of ideas on the policing of rural areas, especially on the relationship between police and public. Her Majesty's inspectors of constabulary discuss these issues with chief constables and their police authorities.
    Mr. Gummer: I thank my hon. and learned Friend for that answer. Is he aware that in many rural areas people are disturbed because, as increasing pressure is put on police resources in the urban parts of rural counties, policemen are withdrawn from the law-abiding villages and put on traffic and other duties in the towns? Is he aware that that means that police coverage is much diminished in such villages? Is he aware of the considerable public unrest? What can be done about it?
    Mr. Brittan: I understand the anxiety. The deployment of police is a matter for chief constables. Deployments can be, and are, discussed with inspectors of constabulary. I am sure that the chief constable involved will note my hon. Friend's question.
    Mr. Alexander W. Lyon: Has the Home Office discussed with chief constables community policing in rural and urban areas? What experiments in community policing are being conducted in metropolitan areas such as London?
    Mr. Brittan: The phrase "community policing" can be interpreted in a variety of ways. Different experiments in different parts of the country are taking place. Even within rural areas there is scope for different types of policing. Such matters are discussed with inspectors of constabulary and the police forces. If the hon. Gentleman has a particular case in mind, I shall do my best to deal with it if he writes to me.
    Mr. Best: Is my hon. and learned Friend aware that the chief constable in the rural area of North Wales has said that police inquiries have been set back by several weeks as a result of the recent showing of the "Nationwide" programme about arsonists in Wales? Is not that highly regrettable?
    Mr. Brittan: I have heard that expression of opinion. Of course I deplore anything which leads to police inquiries being impeded.

    Local Radio
    Mr. Michael Morrisasked the Secretary of State for the Home Department what discussions he has had with the British Broadcasting Corporation concerning its new style of local radio mini stations.
    Mr. Raison: The BBC's plans for local radio were discussed in the Home Office local radio working party on 29 February.
    Mr. Morris: Is my hon. Friend aware that the BBC has at last announced that Northampton is to have its station, but not until the end of 1982? Will he ensure that the Home Office working party makes an early announcement about the future of ILR stations and includes Northampton on the list?
    Mr. Raison: I am aware that the BBC expects that the station will be opened during 1982. The question of ILR stations in Northampton and elsewhere is a matter for the IBA. That body will consider representations in support of ILRs and will take them into account before putting proposals to the working party.
    Mr. Gummer: What is the point of increasing local mini broadcasting stations at a time when the BBC is cutting programmes on its own radio and, in Suffolk, cutting television programmes considerably?
    Mr. Raison: I am not sure what my hon. Friend means by local mini stations. However, the issue is for the BBC. It must make its decisions and then propose them.

    Civil Defence
    Mr. John Evansasked the Secretary of State for the Home Department
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    when he expects to announce the results of his review of civil defence provision.
    Mr. Brittan: We hope to be able to do so after the Easter Recess.
    Mr. Evans: In view of the Home Office's frequently expressed determination to protect civilians in the event of a nuclear holocaust, is it intended to instruct local authorities to start a crash programme in building nuclear shelters? If not, why not?
    Mr. Brittan: That matter can be better dealt with at the conclusion of the review than during the course of it.
    Mr. Allan Stewart: Is my hon. and learned Friend aware that many people are interested in providing their own nuclear shelters, despite there being no financial incentive and such shelters being subject to full VAT? Will he assure the House that that is being borne in mind in the current review?
    Mr. Brittan: I am aware that many people wish to provide their own shelters. The ways in which families can provide simple shelters at reasonable cost are under examination with a view to making advice on that subject available in due course.
    Mr. Cryer: Does the Minister accept that there is no civil defence whatsoever against a nuclear conflagration? Is he aware that the Secretary of State for Defence has said that in the worst circumstances only a few minutes' warning will be given? Is not the best defence to opt out of the nuclear weapons race?
    Mr. Brittan: I do not accept that for one moment. The best way to prevent nuclear conflagration is to be in a position to deter an aggressor. One must have a balanced view about civil defence. Of course there would be immense damage if there were a nuclear attack. That does not mean that nothing can be done to mitigate that damage if such a disaster were to occur.
    Mr. Nicholas Winterton: Will my hon. and learned Friend tell the House what funds are now available for nuclear fall-out shelters under the civil defence system? Will he indicate why it is taking so long for advice to be forthcoming on the specification of such nuclear shelters

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    when people want to provide them for themselves?
    Does he not agree that people are taking civil defence seriously, and regret the disruption that resulted from a previous Labour Administration?
    Mr. Brittan: People are taking civil defence seriously, and that is why my right hon. Friend instituted a review last year. The announcement of the review will come shortly. I am sure that my hon. Friend will wait until then. There is no money available at present for the purpose that my hon. Friend mentioned.
    Dr. Summerskill: May we take it from the Minister's remarks that he does not intend to raise public expenditure on civil defence in real terms? Unless he does that, it will be extremely difficult to increase provision.
    Mr. Brittan: The hon. Lady is entitled to her opinion and her speculation. I think that the House would wish to wait for a proper statement at the conclusion of the review.

    British Broadcasting Corporation
    Mr. Freudasked the Secretary of State for the Home Department whether, in order to enable the British Broadcasting Corporation to retain a competitive wage structure, he will reconsider his decision not to provide extra financing for at least two years.
    Mr. Whitelaw: No, Sir.
    Mr. Freud: Does the Home Secretary accept that with the introduction of channel 4—which he calls service 2—the competition will become tougher? Do not the Government accept that if people are able to spend El on a National Health Service prescription—which, presumably, is what the Government believe—they are willing to pay 11p a day—one-ninth of that sum—to receive a quality BBC service? Is he no longer worried about the popularity or credibility of his Administration?
    Mr. Whitelaw: I shall ignore the hon. Gentleman's last remark. The increase in the television licences that I authorised for both colour and monochrome will bring £1,000 million to the BBC for two years. That is a considerable sum. It is right that the BBC, like everyone else in the country, should consider economies
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    and the way in which it conducts its affairs.
    Mr. Stokes: Is my right hon. Friend aware that, unfortunately, the BBC is grossly overmanned? Is he further aware that if it employed fewer people it could pay larger salaries?
    Mr. Whitelaw: As I have already said very carefully, these are matters for the chairman and governors of the BBC. I make the same response to my hon. Friend.
    Mr. Hannam: Does my right hon. Friend agree that the BBC should look in the opposite direction to raise more revenue? It could easily raise the necessary £130 million by considering other methods of sponsorship, or by selling its excellent productions, which it does not do at present.
    Mr. Whitelaw: As my hon. Friend will be the first to appreciate, the Annan committee, which studied the matter, did not advocate those courses to the BBC. The BBC governors would have to decide whether they wished to change from the course that they are following. Many would doubt whether that was wise—certainly the Annan committee did so.

    Detention Centres
    Mr. Andrew F. Bennettasked the Secretary of State for the Home Department if he will ensure that medical records are available to the courts before a boy is sent to Send or New Hall detention centres for the short, sharp shock.
    Mr. Kilroy-Silkasked the Secretary of State for the Home Department if he will require courts to consider a medical report before committing a boy to Send or New Hall detention centres for the short, sharp shock regime.
    Mr. Whitelaw: The pilot project will be established within existing legislation under which courts cannot be required to consider a medical report or medical records before passing a detention centre sentence, although they have power to call for such reports or records. The medical officers at New Hall and Send detention centres will in all cases consider whether persons received from the courts are physically or mentally unfit for the regime, and if so arrangements will be made for transfer elsewhere.
    Mr. Bennett: Does not the Home Secretary agree that it is almost impossible to make these judgments purely on physical appearance? Does he not think that it is essential that medical information is available to the courts before they make a decision? Will not the courts be held in contempt if they send a person to one of the centres and the medical officer then recommends that he be transferred?
    Mr. Whitelaw: I do not accept the hon. Gentleman's last point. It is right for the medical officers at the centres to decide the matter, and I shall stick by that.
    Mr. Kilroy-Silk: Does not the Home Secretary recall a. recent article by the medical officer at Send, which indicated that depression, suicidal gestures and overdoses were common among the boys at that centre? Did not that article also indicate that anxiety and depression—sufficiently serious to warrant observation and drug treatment—were common to 5 per cent. of the boys? They should never have been sent to a detention centre, especially one where a tougher regime is imposed.
    Does not the right hon. Gentleman agree that if those medical facts had been known to the court in the first place, such an inappropriate sentence would not have been passed, and should not be passed in future?
    Mr. Whitelaw: The hon. Gentleman is criticising the existing regime. I believe that my proposal for medical officers is right and that we should see how it works.
    Sir Ronald Bell: Will my right hon. Friend bear in mind that one of the most successful forms of treatment for drug addiction in Singapore and Hong Kong is precisely the sort of regime that will be operated in the short, sharp shock centres?
    Mr. Whitelaw: I believe that my hon. and learned Friend is right, but we shall have to see how we proceed.
    Dr. Summerskill: Does not the Home Secretary agree that as he has not revealed the exact nature of the regime to the House, and as it is an experiment, nobody—the prison officers, the courts or the doctors—can predict what will be the mental and physical effects of the regime? Even with a medical report they will be left in the dark as to the effects of the regime on the offenders.
    Mr. Whitelaw: I have undertaken to announce the exact details of the projects before they begin.
    Mr. Lawrence: Is my right hon. Friend aware that there appears to be a campaign to misrepresent his proposals for a short, sharp shock as being an institution for physical and mental torture? Will he make it quite clear that the only object of the exercise is to provide a reasonable degree of discipline for young people who do not seem to know the meaning of the word?
    Mr. Whitelaw: I am grateful to my hon. Friend for his remarks. I have made my position on the matter very clear. I have said consistently that there must be no question of brutality in these regimes, because if there were they would not work.
    Mr. Arthur Davidson: Is it not time to stop calling the scheme a short, sharp shock regime? If it is to have any chance of success, it should have at least a proper title, otherwise "short, sharp shock" will become judicial phraseology. Those human beings who are sentenced will feel an understandable sense of grievance at being called by such an inelegant and inappropriate term.
    Mr. Whitelaw: I note the hon. and learned Gentleman's remarks. He should give the pilot schemes a chance to succeed. The way in which I have set them out is a reasonable basis from which to start.

    Violent Crime and Murder (Scunthorpe)
    Mr. Michael Brownasked the Secretary of State for the Home Department if he will call for a report from the chief constable of the Humberside police force about the number of unsolved cases of violent crime and murder in the Scunthorpe area.
    Mr. Brittan: I understand from the chief constable of Humberside that his officers have had considerable success recently in detecting violent crime.
    Mr. Brown: I pay tribute to the Humberside police force for bringing to account a criminal in a murder case. However, is my hon. and learned Friend aware of the grave public concern in my constituency about the large number of

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    crimes of violence that have not been solved, including one or two murders? Will he give the House an indication of whether his Department will be able to assist the Humberside police force in this respect?
    Mr. Britian: Naturally, there is concern about crimes of violence. I think that the House would like to know that the clear-up rate for all offences in Humberside in 1979 was 45 per cent., compared with 41 per cent. for England and Wales. For serious offences of violence the figure was 85 per cent. compared with 81 per cent. in England and Wales.
    Nevertheless, the best assistance that could be given would be for the police to be strengthened. The strength of the Humberside police at the end of January was 1,889, an increase of 112 since publication of the Edmund-Davies report. There is an application for approval of an interim increase in the establishment, which will be considered carefully.
    Mr. Marlow: Will my hon. and learned Friend tell the House how many people in Scunthorpe and other parts of the country received sentences of imprisonment for violence on the picket lines since the beginning of the steel strike?
    Mr. Brittan: That is a different question, but I shall write to my hon. Friend with details.

    Firearms
    Mr. Newensasked the Secretary of State for the Home Department if he is yet in a position to make a statement on the review of firearm matters currently taking place.
    Mr. Whitelaw: I refer the hon. Member to the answer that I gave in reply to a question by my hon. Friend the Member for Devon, North (Mr. Speller) on 6 March.
    Mr. Newens: Does the Home Secretary recognise that the more time that elapses before more stringent regulations for the possession of shotguns are introduced, the greater will be the number of deaths and injuries from their use in crimes of violence? Does he recognise that many members of the police, and the majority of the public, believe that action is long overdue to stop the abuse of the use of
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    shotguns in crimes which are totally unjustified in anybody's eyes.
    Mr. Whitelaw: I made it clear in the reply to my hon. Friend the Member for Devon, North (Mr. Speller) that I did not believe that legislation, which would involve a great deal of bureaucracy and more police time, was justified in this case. I therefore believed it right to proceed by means of a voluntary code on the safety of firearms with the various bodies concerned. That I have done. Those bodies have co-operated very willingly and are now producing those safety codes.
    Mr. Burden: Will my right hon. Friend extend his investigations to the use of the crossbow? It is a deadly and silent weapon which is being used more widely. Will he consider that matter to see whether some control can be exercised?
    Mr. Whitelaw: The crossbow, by its very nature, is not a firearm, but naturally I shall look into the matter that has been raised by my hon. Friend.
    Mr. Ford: Does the right hon. Gentleman agree that there is adequate evidence to show that if one punitively restricts the number of legitimately held firearms, it is not an automatic corollary that the number of unlawful firearms is thereby reduced?
    Mr. Whitelaw: I entirely agree with the hon. Gentleman. That was one of the reasons why I came to my decision in regard to legislation. It was also one of the reasons why I believed that a voluntary code of conduct on the control of firearms was the right way to proceed.
    Mr. Cyril D. Townsend: Does not my right hon. Friend understand that throughout the big conurbations the shotgun has now become the preferred weapon of the serious criminal? One of the most effective ways in which the Government can fulfil their pledge to protect the police is to have far more effective controls over shotguns.
    Mr. Whitelaw: I have made clear the way in which I wish to proceed without legislation, which is through a voluntary code of conduct which I hope will have the support of Opposition Members. I hope and believe that that is the right way to proceed, and I shall proceed with it as hard as I can.

    Parliamentary Boundary Commission
    Mr. Norman Atkinsonasked the Secretary of State for the Home Department how long he now expects the Boundary Commission to require to complete its work; and if it is his intention to include within the subsequent legislation other electoral reforms.
    Mr. Brittan: I understand that the Parliamentary Boundary Commission for England is likely to have completed its task of reviewing parliamentary constituencies by early 1982. It would not be appropriate to include in the Order in Council implementing the Commission's recommendations any provisions dealing with other electoral matters.
    Mr. Atkinson: Does not the Minister agree that it is the Government's intention to legislate separately for other provisions, such as the doubling of absent voters list? Bearing in mind that much time will be taken to settle the boundaries in respect of almost 400 separate constituencies, does not the Minister agree that it will leave little time for political organisations to implement those recommendations prior to the next general election?
    Mr. Brittan: I am glad to learn that I shall have the hon. Gentleman's support for the early and prompt implementation of the report of the Parliamentary Boundary Commission as soon as it becomes available.
    Mr. Fletcher-Cooke: Is it really the case that before the boundary commissioners can report on the Westminster divisions and their differences they must also report on any changes in the European constituencies? If that is so, is not that a ridiculous fetter on their obligations?
    Mr. Brittan: lit is the case that the law requires the Commission to submit a supplementary report on the European Assembly constituencies. I can well understand and appreciate the view that it is perhaps unnecessary for that to be required.
    Mr. George Cunningham: Does the Minister accept that the provision to which he has just referred is contained in the law of the land at present? Does he remember a speech which he made to
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    the Conservative Party conference last October in which he said that the Government intended to proceed with all haste on the implementation and pushing ahead of the Boundary Commission report? In view of the need to be entirely nonpartisan, can he give an assurance that there will be no short cuts and no amendments of the law which are designed purely to achieve objectives which may suit the Conservative Party while being in conflict with the law of the land as it stands?
    Mr. Britian: I think that the hon. Gentleman is confusing changes in the law and conflict with the law. I can certainly assure him that we shall proceed in accordance with the law of the land.
    Dr. Edmund Marshall: What is the present position with regard to the membership of the Parliamentary Boundary Commission for England?
    Mr. Brittan: The present position is that the new membership was announced on 10 March.
    Mr. Maxton: In view of the Minister's statement that he is not considering other electoral reforms, will he have a look at the implications of the Transport Bill, which is at present going through the House, with regard to the transport of electors to polling stations and the implications between the two?
    Mr. Brittan: I did not say that we were not considering other electoral reform measures, because, as some hon. Members will know, I have made a number of speeches indicating that we are considering other measures. What I said was that it would not be appropriate to include any other measures in the Order in Council implementing the recommendations of the Boundary Commission.

    PRIME MINISTER (ENGAGEMENTS)
    Mr. John Browneasked the Prime Minister if she will list her official engagements for Thursday 27 March.
    The Prime Minister (Mrs. Margaret Thatcher): This morning I presided at a meeting of the Cabinet. In addition to my duties in this House, I shall be having

    1645
    further meetings with ministerial colleagues and others. Later this afternoon, I shall be greeting Chancellor Schmidt on his arrival in this country for bilateral talks.
    Mr. Browne: Will my right hon. Friend take time to note that many people, particularly in Winchester, will welcome the Budget as extremely realistic, particularly the enlightened provisions for the rejuvenation of our inner cities and small businesses? However, many people will feel that a monetarist Budget can work effectively only in a free economy. Therefore, will my right hon. Friend reassure the House of her dedicated efforts to break down the ill-effects of the two cartels, namely, the public employers and trade unions which operate a closed shop without a secret ballot?
    The Prime Minister: I am grateful to my hon. Friend. I believe that many people will welcome the Budget, which protects the weak, is fair to all and offers enterprising proposals for the vitality of the economy. I agree that we must reduce the role of the State, particularly as an employer. As my hon. Friend knows, we are passing denationalisation measures into law. I agree with him that we must deal with the power of the trade unions. As he knows, important proposals on the closed shop are now contained in the Employment Bill.
    Mr. David Steel: How does the Prime Minister square two proposals in the Budget with her commitment to the incentive society, namely, the failure to uprate child benefit in line with inflation and the abolition of the lower rate band?
    The Prime Minister: As the right hon. Gentleman knows, the lower rate band was the top rate only for people who on the whole work only part time. The Chancellor took the view, I believe wholly rightly, that the most important thing was to increase personal allowances. I believe that will have the biggest possible effect. Child benefit, as the right hon. Gentleman knows, has been increased by some in 18¾ per cent., which is a considerable increase. If he looks at the overall effect of the Budget, he will find that it offers least help to single people—if I may put it that way—more help for married people and most help to families.
    Mr. McQuarrie: When my right hon. Friend today meets her ministerial colleagues and Chancellor Schmidt, will she discuss with them the question of yet another contravention by the French, by fishing for herring when fishing for that species is banned? That is causing serious concern to the British fishing industry which is standing by the EEC regulations.
    The Prime Minister: I am aware of some of the allegations which have been made about herring fishing contraventions, which are perhaps permissible if they are very small in relation to a much larger catch of big fish, but which on other grounds are wholly outside the ban which our fishermen operate in the North Sea. I shall convey those strong feelings to Chancellor Schmidt.
    Mr. James Hamilton: Will the Prime Minister today take time to tell the people whether the Budget will increase unemployment or decrease it? Will she also tell the trade unions that the Government have no time for them and that they are proving that conclusively by the legislation which they are passing through the House?
    The Prime Minister: The hon. Gentleman heard my right hon. and learned Friend the Chancellor of the Exchequer say yesterday that, unfortunately, we expect unemployment to rise. Unemployment rose heavily during the lifetime of the previous Labour Government. Indeed, it more than doubled. Certain cases of overmanning must be reduced. The hope for future jobs must come from the vitality of small businesses. The Budget was very forthcoming about that.
    Mr. Dykes: Will my right hon. Friend reflect that although it was extremely irritating when the Italians announced the postponement of the European summit, there is a chance that that will assist in reaching a settlement? Will she further reflect that Chancellor Schmidt may intervene?
    The Prime Minister: We were expecting to have bilateral talks with Chancellor Schmidt during these two days. I agree that we must use the interim profitably in order to reach a settlement of Britain's genuine budget complaints earlier than we had hoped.
    Mr. James Callaghan: When the right hon. Lady gives an account of the progress of unemployment will she include the fact that there was a month by month reduction in the level of employment during the last 18 months of the previous Labour Government? Does she not agree that that was coupled with a substantial reduction in inflation? If she is to bandy figures, she should include that in the record. Why are the Government cutting measures to assist the unemployed, including skillcentres?
    The Prime Minister: I shall not quarrel with the right hon. Gentleman about the figures that he presented earlier. He knows that the Labour Government inherited about 600,000 unemployed and that that figure more than doubled during the lifetime of that Government. As regards skillcentres, some of the places were not fully taken up. It did not seem right and proper to allow those places to continue.
    Mr. McCrindleasked the Prime Minister if she will state her public engagements for 27 March.
    The Prime Minister: I refer my hon. Friend to the reply that I gave a few moments ago.
    Mr. McCrindle: Has my right hon. Friend the Prime Minister seen reports today to the effect that broadcasting organisations are planning to spend £3 million on covering the Moscow Olympics? As the BBC is having to bear considerable expenditure cuts, including the possible wind-up of some of its famous orchestras, will the Prime Minister make any recommendations to the BBC about such great expenditure?
    The Prime Minister: I am grateful to my hon. Friend for raising that point. I understand that the BBC has issued a statement to the effect that no final decision has been taken on the coverage of the Moscow Olympics. That decision will depend upon sports news value at the time and, therefore, on the number of people who go to the Moscow Olympics. The BBC will reconsider the issue nearer the time.
    I share my hon. Friend's views about the proposals to reduce the number of orchestras. I am glad that private help
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    is being given to keep those orchestras in being.
    Mr. loan Evans: As the Chancellor admitted yesterday that the rate of inflation had doubled and that it was likely to be 20 per cent. next year, does the Prime Minister feel that he is justified in making a five-fold increase in prescription charges? Is it not a tax on the sick?
    The Prime Minister: The rate of inflation will rise a little. As the hon. Gentleman noticed, my right hon. and learned Friend was careful not to increase the retail price index by very much in the Budget. A number of people had expected much higher increases in taxes and charges.
    By the time the prescription charge of £1 comes in in December, the cost of a prescription item will be about £2½90. That is almost three times the amount paid. Some 66 per cent. of prescriptions go to those who pay nothing as a result of exemptions.
    Mr. Waldegrave: Thank you, Mr. Speaker. I am glad that we have finally got together—
    Mr. Speaker: Order. Although the hon. Gentleman's remark was meant kindly enough, it was his own fault last week. He had been jumping up, but did not do so when I called him.
    Mr. Waldegrave: My remark was meant as an indirect apology. I shall make it more direct. Does my right hon. Friend agree that although some of her colleagues may wish to argue about individual items in the Chancellor's broad programme, that in no way reflects the fact that the enormous majority of her party are firmly behind the Chancellor's broad strategy?
    The Prime Minister: I wholly agree. It is the only strategy that will bring Britain back to prosperity and self respect.
    Mr. Campbell-Savours: The right hon. Lady has referred to "fairness". Is it fair that steel workers should be offered 8 per cent. while local authority workers arc offered 14 per cent. and the rate of inflation is nearer 20 per cent.? Does she not realise that Underground fares in London have risen by 45 per cent. in the past 12 months? Does she not accept

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    that prescription charges have increased five-fold over a 12 month period? Where is the consistency?
    The Prime Minister: As the hon. Gentleman knows, consistency is found in the fact that people must earn their keep. No one can expect that keep from anyone else. I had thought that the hon. Gentleman was in favour of responsible free collective bargaining. Earnings vary according to the circumstances of an industry. I have already replied to a question on prescription charges. Perhaps the hon. Gentleman will recognise that prescription charges did not go up for a very long time.

    LITTLEPORT
    Mr. Freudasked the Prime Minister if she will pay an official visit to Little-port.
    The Prime Minister: I have at present no plans to do so.
    Mr. Freud: Some of my constituents will be very sorry to hear that. What they would have liked to ask the Prime Minister, after her oft-repeated support for small businesses and her help to small businesses in this Budget, is how she would expect a sub-postmaster with one employee to pay that employee eight weeks' sick pay, as he would have to do. They would also like to know who will become rich as a result of his having to pay tax and employer's contribution for both employee and the replacement.
    The Prime Minister: I would be very surprised if a sub-postmaster with one employee had no alternative source of income. I was brought up in a shop with a sub-post office [Interruption.] I was brought up in such a shop for many years. A large sub-post office has a good deal of income or it has another shop. Perhaps the hon. Gentleman will raise such issues of detail when the appropriate Bill is laid before the House.

    ELDERSLIE
    Mr. Allan Stewartasked the Prime Minister whether she has any plans to visit Elderslie.
    The Prime Minister: I have at present no plans to do so.
    Mr. Stewart: Since Elderslie is a centre of the carpet industry, would my right hon. Friend assure those employed in that industry that she will lose no opportunity to draw the attention of our EEC partners in the Commission—at the highest level—to the fact that the Department of Trade has immense support from all parties? Does she accept that we should press for urgent action at Community level in order to deal with unfairly priced American imports?
    The Prime Minister: I am very well aware of the problems facing the carpet industry as a result of cheap imports from the United States and Canada. I am also aware of the problems that face my hon. Friend's constituency. As he knows, my right hon. Friend the Secretary of State for Trade secured some quotas for polyester yarn and nylon yarn. Unfortunately, he did not do so for carpet imports. The Commission and the Department of Trade are monitoring the situation very closely. They would not hesitate to take further action if that were thought necessary.

    CRUISE MISSILES
    Mr. Cryerasked the Prime Minister what representations she has received regarding the siting of cruise missiles in the United Kingdom.
    The Prime Minister: I have received two petitions and about 400 letters.
    Mr. Cryer: Does the Prime Minister accept that the £10 million spent on installing cruise missiles could be better used to increase mobility allowance by at least £1 per week and the single-parent premium by at least 50p per week for 12 months or more? Does the right hon. Lady agree that, since Parliament was ignored, the people who live within 30 miles and preferably a wider radius around the proposed cruise missiles sites should have the right to vote on whether they accept them, with an 80 per cent. vote as for the closed shops, for example? Alternatively, does the right hon. Lady believe that freedom of choice exists only when she has the choice?
    The Prime Minister: The hon. Gentleman asked a similar question before. As he knows, no freedom would exist

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    in this country unless there were a Government prepared to defend it. It is the task of the Government to make such provision as they believe appropriate, debated before Parliament, to provide for the proper defence of this country to deter any enemies at all levels. The provision of cruise missiles is one of those levels.

BUSINESS OF THE HOUSE
Mr. James Callaghan: Will the Leader of the House please state the business for next week?
The Chancellor of the Duchy of Lancaster and Leader of the House of Commons (Mr. Norman St. John-Stevas): The business for next week will be as follows:
MONDAY 31 MARCH—Continuation of the debate on the Budget Statement.
TUESDAY 1 APRIL—Conclusion of the debate on the Budget Statement.
Consideration of Lords amendments to the Competition Bill.
WEDNESDAY 2 APRIL—Consideration of Lords amendments to the Education (No. 2) Bill.
Remaining stages of the Limitation Amendment Bill (Lords).
THURSDAY 3 APRIL—It will be proposed that the House meets at 9.30 am, takes questions until 10.30 am and adjourns at 3.30 pm until Monday 14 April.
Mr. Callaghan: Is the Leader of the House aware of the dissatisfaction about the public expenditure White Paper and the way in which it was presented? We have not had time to consider it before the debates. A number of issues are emerging. For example, it appears that council house building is likely to stop completely during the next year or so. In view of that and other matters that could be raised, will the Leader of the House undertake that we shall have a debate on the White Paper in the week following the Easter Recess?
Mr. St. John-Stevas: Many hon. Members have found it convienient that the public expenditure White Paper and the Budget proposals should be considered together. After all, one is dependent on
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the other. I cannot at this point give the right hon. Gentleman an undertaking. I shall consider the matter, but I believe that it is more likely that the debate will be later than the first week after the recess.
Mr. David Price: In view of the importance of the engineering profession to the future of this country, will my right hon. Friend undertake that shortly after the Easter Recess we shall have the long-awaited debate on the Finniston report?
Mr. St. John-Stevas: An inter-departmental committee is considering the recommendations of that extremely important report. After it has made its recommendations the Secretary of State for Industry will make a statement.
Mr. J. Enoch Powell: Has the right hon. Gentleman's attention been drawn to early-day motion No. 529, standing in the name of a right hon. Member, with regard to the future leave of absence for the Chair?
[That this House will hereafter give its indulgence and leave of absence to Mr. Speaker by resolution and not otherwise; and the Clerk, in announcing such absence to the House in the customary manner shall hereafter refer to Mr. Speaker's absence as by leave of the House' and not as 'unavoidable'.]
Will the right hon. Gentleman make arrangements for the matter to be considered through the usual channels and in any other appropriate way?
Mr. St. John-Stevas: I have seen the right hon. Gentleman's motion. The first part proposes a departure from a longstanding practice, and one would wish to consider the implications of that important suggestion. I have sympathy with the second part. I shall see what can be done to meet the suggestion. I believe that the right hon. Gentleman knows that it would involve an amendment to paragraph 2 of Standing Order No. 105.
Mr. Speaker: If it will help, I promise not to ask for a day off for a long time.
Mr. Nicholas Winterton: I do not believe that my right hon. Friend mentioned a recess motion. We normally have a recess motion before this House goes into recess. Will my right hon.

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Friend indicate when the Adjournment motion will take place? It is a good opportunity for Back Benchers to raise matters of importance to their constituencies. The Government have failed to provide time to debate the textile industry, and I wish to raise the continuing problems of that important industry.
Mr. St. John-Stevas: My hon. Friend is right in saying that a recess motion is normal. It will take place from about 3.30 pm on Wednesday 2 April. It is equally well established, as my hon. Friend will know, for that announcement not to be contained in the Business Statement.
Mr. English: The BBC cuts in local radio, television orchestras, and so forth will be decided on 17 April. Will the House have an opportunity in the first three days after the recess to express a view, say, in a three-hour debate?
Mr. St. John-Stevas: I cannot answer questions on the business for succeeding weeks during this week's business questions. That is, technically, what the hon. Gentleman's question amounts to. The BBC is responsible for the cuts that it makes. I share the hope that the hon. Gentleman latently expressed in what he was saying, that there will be no discrimination against the arts.
Mr. Lawrence: My right hon. Friend the Home Secretary said this afternoon that he would be putting forward the Government's proposals on the recommendations in the May report after the recess. May we have a debate before those proposals arc put before the House?
Mr. St. John-Stevas: We must await my right hon. Friend's statement before deciding that.
Several Hon. Members rose—
Mr. Speaker: Order. I shall call the right hon. and hon. Members who have risen. I say to hon. Gentlemen who have tried to catch my eye that I know that the House is anxious to get on to the main business of the day.
Mr. Jay: The Financial Secretary to the Treasury withheld a relevant document from the House during the debate on the EEC budget on Monday. May we have an assurance from the Leader of the House that there will be adequate time soon to discuss that important document?
Mr. St. John-Stevas: I understood that there was some difficulty about that during my absence at the enthronement of the Archbishop of Canterbury. I do not believe that the right hon. Gentleman is entirely fair to my hon. Friend the Financial Secretary. My hon. Friend did not quote from the document; he referred to it. It was made available to hon. Members on Tuesday. The matter will be examined by the Scrutiny Committee. If the Committee recommends a debate, we shall certainly have one.
Mr. Nelson: Will my right hon Friend confirm that in the previous Parliament it was the practice for the Government to have a debate on the defence White Paper and for there to be three separate debates on the Army, Royal Navy and Royal Air Force on Supply days? Is it the intention of the Opposition to follow the same practice, and will time be found for separate debates on each of the three Armed Forces?
Mr. St. John-Stevas: The defence White Paper will he published on 2 April. After an interval to consider it, there will be a full debate in this House. The arrangements have not been finalised, but we shall certainly consider my hon. Friend's suggestion.
Several Hon. Members rose—
Mr. Speaker: I propose to call only those hon. Gentlemen who had risen before I made my statement earlier.
Mr. Armstrong: As the BBC Governors appear to be accepting the Government's insistence on cuts that some of us believe will do irreparable damage to a great public service, will the right hon. Gentleman assure us that there will be a debate in the House before the cuts are implemented?
Mr. St. John-Stevas: I cannot give that assurance. However, I believe that whatever cuts the BBC has to make because of the financial limitations within which it moves should be evenly and fairly distributed and that there should not be discrimination against orchestras. I echo what my right hon. Friend the Prime Minister said about how welcome it is that £250,000 has been raised from private industry for the Scottish National Orchestra.
Mr. Douglas: Will the right hon. Gentleman bear in mind the reply that he

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gave to my right hon. Friend the Member for Battersea, North (Mr. Jay) about the document on the European budget and convergence? Does he recognise that his responsibilities are to the whole House, and that he should ensure that documents that are in the possession of the press are in the possession of hon. Members?
Mr. St. John-Stevas: I agree with that. I discussed in detail the events surrounding those documents and I was satisfied that no action was taken that infringed the rights of hon. Members.
Mr. Alton: Has the Leader of House seen early-day motion No. 502, which deals with the new building regulations and fees?
[That an humble address be presented to Her Majesty, praying that the Building (Prescribed Fees) Regulations 1980 (S.I., 1980, No. 286), dated 3rd March 1980, a copy of which was laid before this House on 11th March, be annulled.]
Is he prepared to accept the plea from Members of the three major parties for a debate before those fees and building regulations are implemented? Does he consider it right that they should be implemented before a debate on the subject?
Mr. St. John-Stevas: I have seen the motion on the Order Paper. It is an important matter, but I cannot see my way to providing time for a debate before the recess.
Mr. Mike Thomas: With regard to the Budget debate and the information provided to the House, why does the Red Book not contain any prediction of the growth or otherwise in manufacturing output for the next 12 months? Is it because the Government expect a decline and are not prepared to tell the House?
Secondly, why is the energy section in the public expenditure White Paper wholly based on the situation that prevailed several months ago in respect of the nuclear power programme? When will the Government tell the House the truth about that?
Mr. St. John-Stevas: I am flattered that those questions should be directed to me. They are not remotely connected
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with next week's business. They are important and I am willing to do what I can to answer them. However, I am not the Chancellor of the Exchequer at the moment. I am the Chancellor of the Duchy of Lancaster—a rather more important post.
The contents of the Red Book are the responsibility of my right hon. and learned Friend the Chancellor of the Exchequer, He indicated that he expected a rate of growth of 1 per cent. over the next few years. He wisely put it at a low level instead of inflating it to an artificial level as previous Chancellors have done.
The point made by the hon. Gentleman about nuclear policy is important. That policy is under review and there will be a statement in due course.
Mr. Ennals: May I wish the right hon. Gentleman success in his ambition to become Chancellor of the Exchequer?
More seriously, has he noticed the growing support of many hon. Members for the motion that expresses concerti about the future of the Westminster hospital and Westminster medical school?
[That this House, conscious of the great service provided by the Westminster Hospital to the citizens of Westminster, its great medical achievements with a worldwide reputation in teaching and research and the quality of sevice provided for many years to Members of both Houses of Parliament, expresses its deep concern at the proposals published by the London Health Planning Consortium which propose the closure of 410 of the 510 beds at the Westminster Hospital, thus reducing it to a small support hospital without facilities for teaching or research; and calls upon the Secetary of State for Social Services to give an early assurance that Westminster Hospital will continue.]
May I press him to provide time as soon as possible for a debate on the Flowers report on medical education in London, and the London health planning consortium's report on hospital beds in London?
Mr. St. John-Stevas: I agree with the right hon. Gentleman that those matters are important. We are still awaiting the report of the University of London and the reflections of the health authority on the matter. We can consider the matter when we have that knowledge.
Mr. Maxton: The Criminal Justice (Scotland) Bill is receiving its Third Reading in the other place today. Will the right hon. Gentleman announce when the Bill will be read a Second time in this House, or will he make an announcement today that, in view of the savage attack on civil liberties contained in the Bill, he will now withdraw it?
Mr. St. John-Stevas: We must separate the two parts of the question. Logically, I shall reverse the order. It is not the intention of the Government to withdraw the Bill. That paves the way for answering the first part of the question. In response to the hon. Member's soliciting. I shall try to bring the Bill before the House at an early opportunity.
Mr. Dubs: When will the Leader of the House be in a position to bring forward proposals on the changes decided by the House on Members' secretaries' pensions and allowances?
Mr. St. John-Stevas: I have given an instruction to the Fees Office that it should pay those new rates of allowance for secretarial and research assistants to any hon. Member applying for them, backdated to 14 February. I have today answered a question on the subject tabled by my right hon. Friend the Member for Taunton (Mr. du Cann), and I hope that that will help hon. Members. There are some difficult questions with regard to pensions, and we are investigating the technicalities, with a view to making rapid progress. Meanwhile, I hope that hon. Members will be pleased to know the first part of my answer.
Mr. Shore: The Leader of the House will have read the further accounts about the situation in Cambodia, to which reference was made under Standing Order No. 9 yesterday. Will he arrange for an early statement to be made by one of his colleagues in the Foreign and Commonwealth Office?
Mr. St. John-Stevas: The situation in Cambodia is serious, as the right hon. Gentleman knows. I am pleased to say that, with the support of the House, the Government have made £7 million available for the relief of famine there. The position has grown grave again. My noble Friend the Foreign Secretary is reviewing the position, and if he has a further development in policy to announce,
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it will be made in the other place and the Lord Privy Seal will make a similar announcement here.
Mr. Speaker: I remind hon. Members that on the motion for the Adjournment of the House on Thursday 3 April up to six hon. Members may raise with Ministers subjects of their choice. Applications should reach my office by 10 p.m. on Monday next. A ballot will be held on Tuesday morning and the result will be made known as soon as possible thereafter.

SOCIAL SECURITY BENEFITS (UPRAT1NG)
The Secretary of State for Social Services (Mr. Patrick Jenkin): I will, with permission, Mr. Speaker, make a statement about next November's increases in social security benefits, and about the other changes foreshadowed in the Chancellor's statement yesterday.
The retirement pension for a single person will go up by £3·85, from £23·30 to £27·15, and the rate for a married couple by £6·15, from £37·30 to £43·45. These increases match the full 161½ per cent. expected movement in prices between the last uprating and the next, which, under clause 1 of the Social Security Bill passed by this House and now in another place, has been fixed for 24 November.
Other benefits which will be similarly price protected include widows' pensions, war and industrial disablement pensions, non-contributory invalidity pension, new scheme additional pensions and graduated pensions, attendance allowance and invalid care allowance. There will be a special improvement in mobility allowance—from £12 to £14·50 a week—an increase of 21 per cent.
Supplementary pensions will be increased and aligned with the new basic retirement pension.
As announced yesterday, child benefit will be increased by 75p to £4·75 a week for each child. The premium for one-parent families will go up by 50p to £3 a week. Thus, a single parent with two children will get £12·50 for the children, compared with £10·50 at present.
Family income supplement for lower paid workers will be raised in November

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by an average of one-third, thus considerably improving the real value of this benefit. This includes an extra amount for fuel costs—to which I shall return later.
Most of the long-term contributory benefits that I have mentioned so far are taxable. In contrast, the short-term benefits and invalidity benefit have hitherto not been treated as part of taxable income, although it has been common ground on both sides of the House that they should, in principle, be taxed. As my right hon. and learned Friend said yesterday, proposals to achieve that will be put before the House in due course, so that these benefits will be treated as part of taxable income from April 1982, or as soon as possible thereafter. This is necessary to restore a fairer balance between incomes in work and out of work.
As an interim step, these untaxed benefits will be increased next November by 11½ per cent.—5 per cent. less than the increase in the taxed long-term benefits. Accordingly, sickness and unemployment benefit will go up by £2·15 a week for a single person, and by £3·45 a week for a married couple, to £20·65 and £33·40 respectively. Invalidity pension will be increased by £2·70 to £26·00 for a single person, and by £4·30 to £41·60 for a married couple. The dependency increases for children paid with these benefits will be increased by 16½ per cent., offset by the 75p increase in child benefit.
The Government are determined to maintain the safety net for the poorest people and accordingly the scale rates of short-term supplementary benefit will be fully price protected by increasing them in line with the 16½ per cent. forecast.
The cost of this uprating will be about £3 billion in a full year. About two-thirds of that will be met out of the national insurance fund, and I shall review contribution rates as usual in the autumn. Any necessary changes will take effect from April 1981.
For the convenience of the House, I am circulating details of the new rates of benefit in the Official Report, and copies will be available in the Vote Office.
The social security programme costs about £20 billion a year. It accounts for about one quarter of all public expenditure. It has grown, in real terms, by £7,000 million over the last 10 years, and
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now costs the equivalent of £1,000 for every household in the land. Continuing growth at this rate cannot be sustained, particularly at a time of nil or falling economic growth. Even after making the savings announced by the Chancellor yesterday, this programme will still rise next year by about 2½ per cent. in real terms. Moreover, given the need to contain the size of the public sector borrowing requirement, it is inescapable that this programme must bear some share of the necessary economies.
The savings that we have identified affect primarily those on short-term benefit, above the supplementary benefit level. Though I cannot pretend that they will be welcome, I must stress again that the "safety-net"—the short-term supplementary benefit level below which none shall fall—retains its real value.
The changes affect the earnings-related supplement, the linking rules for sickness and unemployment benefit, eligibility of occupational pensioners for unemployment benefit and the limit for the retirement pensioners earnings rule.
First, earnings-related supplement: I propose that from January 1981, the 15 per cent. rate of supplement on earnings over £30 a week, paid with short-term incapacity, unemployment and widowhood benefits, should be reduced to 10 per cent. and that, a year later, in January 1982, the supplement as a whole should come to an end.
The supplement was introduced in 1966, since when circumstances have considerably changed. Redundancy payments are now more generous and the rapid development of employers' sick pay schemes means that the supplement—which has been allowed by successive Governments to decline in real value—is much less significant than formerly.
Next, the linking rules: the changes we propose will tighten the rules in relation to very short spells of incapacity, or repeated spells off work. We propose to shorten the linking period from the present 13 weeks to six weeks. In addition, we propose that benefits should not be paid for spells lasting three days or less. Both rules have, in the past, given scope for abuse. In particular, the operation of the 13-week rule has led to people getting the higher invalidity benefit after a succession of widely spaced but short spells of minor illness—a circumstance

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for which it was never intended.
Thirdly, unemployment benefit for occupational pensioners: these are, by definition, people who have retired and taken a pension. The proposal we make is that from April 1981 unemployment benefit will be reduced, pound for pound, for those whose pensions exceed £35 a week. The House has, on no fewer than three occasions, rejected this change, and I myself have spoken and voted against it. Yet, when economies in the social security budget must be made, it is not now reasonable to protect entitlement to a year's unemployment benefit for people who have retired and are in receipt of significant occupational pensions.
Finally, in the context of the economic situation as a whole, it is difficult to justify further increases in the earnings limit at this stage. At a time when other groups are having to make sacrifices, we believe that it is right to hold the earnings limit at its present level of £52 a week for the time being. However we remain firmly committed to ending the earnings rule as soon as circumstances allow.
The overall effect of this group of changes, including the 5 per cent. abatement, will be to save at current prices £270 million in 1981–82 and £480 million in 1982–83, less than 2 per cent. of the social security budget as a whole. But, I repeat, this programme will still be growing at a time of falling output.
Legislation will be needed to implement these changes. A Bill will be published tomorrow, which will also cover the changes in supplementary benefits for strikers' families, outlined by my right hon. and learned Friend yesterday.
I come now to help with fuel costs for consumers who are hardest hit. The supplementary benefit heating additions usually go up in line with fuel costs and, of course, the main scale rates of benefit take account of fuel costs with other living expenses. But this year we recognise that this would not be enough, and I am therefore proposing a special package.
First, the basic rate heating addition will be nearly half as much again, increasing from 95p a week to £1·40—that is, to £72·80 a year. Secondly, the middle and upper rates will be not only increased but merged into a combined rate
1662
of £3·40 a week, worth £176·80 a year. This will simplify the scheme and will mean an increase of almost 80 per cent. for some 350,000 people, largely the sick, the disabled and the old.
In addition to these substantial increases, the basic rate heating addition of £1·40 a week will be paid automatically to supplementary pensioner households above the age of 70—this winter's scheme was confined to the over 75s—and to supplementary benefit families with children under 5. Although most severely disabled people on supplementary benefit already qualify for a heating addition, there will be a "fail-safe" arrangement to pick up any who do not. Furthermore, in order to help low income families in work, a special addition of £1 per week will go to FIS families, on top of the £1 already added for fuel this winter.
We are taking other measures outside the social security schemes. Needy pensioners will be helped to save fuel by raising the grant under the home insulation scheme from 66 per cent. to 90 per cent. of the cost. Ministers are also launching an urgent study into ways of helping the old and disabled to save fuel, by insulating their homes, by draught proofing and by making better use of heating appliances. Such a scheme could involve the voluntary bodies and could use younger unemployed people under existing Manpower Services Commission powers. The fuel industries, too, are being encouraged to play their part by sensitive handling of the problems of poor consumers and by developing and extending their easier payment arrangements.
This is, by any standards, a substantial package of extra help. Expenditure on supplementary benefit heating additions, apart from the special measures we announced for this last winter, is running at about £100 million a year. The continuation of this winter's measures adds about £20 million the measures I have just announced add a further £85 million. We shall thus be spending in total over £200 million a year on special help for those least able to cope with rising fuel costs.
In a very difficult year we are protecting benefits for the elderly, preserving intact the safety net below which none shall fall, providing worthwhile help for

1663
lone parents and low income families with children and giving substantial new help with fuel costs to the needy.
The Government came into office committed to help those in the greatest need, and that is what we are doing. By next November, lone parents will have benefited by a 50 per cent. increase in the child benefit addition, by entitlement to the higher long-term rate of supplementary benefit after one year instead of two, and by a more generous sliding scale of disregard for earnings. Low income earners with children, including single-parent earners, will have been helped by doubling the family income supplement.
The disabled will have been helped by a 45 per cent. increase in mobility allowance, as well as by getting the longterm supplementary benefit rate after one year instead of two. The married pension will have gone up by £12.25 per week. No fewer than 2 million needy people will receive help with their fuel bills. That means £20 million more, in real terms, than in the last year of the previous Government. These are not the actions of a Government who do not care. But caring is not just: coping with the present; it is safeguarding the future. If we do not make this country more prosperous, the people we want to help the most will be the very people who will suffer most—the old, the sick, the disabled and the poor. It is on their behalf that I commend this package to the House.
Mr. J. Enoch Powell: On a point of order, Mr. Speaker. Is there any device whereby it is possible to avoid a Minister having to make to the House a statement lasting a quarter of an hour which is difficult for right hon. and hon. Members not in possession of the text to absorb and still enable the facts to be dealt with in debate by this House?
Mr. Speaker: The content of the Minister's statement is, of course, a matter for his judgment. I cannot help the right hon. Gentleman.
Mr. Orme: The closing remarks of the Secretary of State cannot hide the fact that the Budget and the statement he has made today are a fundamental attack upon millions of working people and the unemployed. The last time that unemployment benefit was reduced in real terms was in 1928. The present reduction, along with
1664
the proposed reduction in invalidity and sick benefit, will mean a five-point reduction—or one-third—of their entitlement. What will the Secretary of State do to protect the people he will now put below the poverty level? How many more people now will be forced to go on supplementary benefit, a benefit that we want to see phased out and reduced?
I think that the House should note that invalidity benefit was introduced by a previous Conservative Government and has now been changed from a long-term benefit to a short-term benefit. Along with the invalidity payment, will the noncontributory invalidity pension, invalid care allowance and the housewives' noncontributory invalidity pension have to take account of the five-point reduction that the right hon. Gentleman is proposing? Perhaps he would inform the House about that.
Let us consider the effect on the low paid workers of the removal of the lowest rate tax band. By abolishing the reduced rate band of tax and failing to increase child benefit in line with inflation, the Secretary of State has actually helped to reduce incentives for the low paid and has widened the poverty gap. Perhaps he would answer that point. The House should also note that by fixing the date of payment as 24 November he has actually taken £34 million in benefit away from people which would have been paid to them if the date had been 17 November, and he ought to account for that. That is a lot of money for people on benefit.
I now turn to the removal or deeming of £12 in relation to strikers' families. We see this as a direct attack upon the trade union movement. Law-abiding families are being treated on a different basis from families of convicted people. It is right to treat families of convicted people decently, but this Government are making an example of the families of those who are on strike.
I turn now to the health charges. I am glad to see that the right hon. Lady the Prime Minister is present. On 18 April 1979 she said:
"Let me make this clear: the Conservative Party has no plans for new National Health Service charges."
What is the charge for the eye test other than a new charge under the National Health Service? Where does the Prime

1665
Minister stand in regard to that statement?
The new prescription charge is a direct tax on health. Surely it is outrageous that, before it has been increased to 70p, the increase to £1 has already been announced. I ask the Secretary of State whether he will make any further exemptions to assist those who will feel the weight of this new charge. It is no good Conservative Members laughing because—
Mr. Peter Fraser: What did the Labour Government do?
Mr. Orme: We did not increase it to £1.[ Interruption. ] It is the working poor who will feel the effect of this increase to £1 and I hope Conservative Members take note of that.
I assume that the Secretary of State wants to act legally but why has he not given the uprating, based both on earnings and prices, in line with the 1975 Act? The Social Security Bill is not yet law and he has no right to give the uprating based on prices only. The Bill has not even gone to another place and we are entitled to know why the 1975 Act has not been implemented. We have had difficulty with the Secretary of State on previous issues.
In regard to pensioners, if a shortfall is forecast, will the Secretary of State make it good and not act as he did on the previous shortfall? [ Interruption. ] I think I am entitled to ask these questions. If the Government make these changes, we are entitled to ask searching questions.
The abolition of the earnings-related benefit is absolute robbery, because people have contributed to the earnings-related benefit since 1966. What percentage of people actually receive redundancy payments, and what percentage of their contribution based on their average earnings goes towards earnings-related benefit? Will contributions now be reduced to take account of the benefit that the right hon. Gentleman is removing?
Finally, I come to a subject that will interest Conservative Members—child benefit. Will the Secretary of State confirm that £1.20 is the correct amount to meet the rate of inflation by November this year? Is he aware that by not raising child benefit by £1.20 he is hitting the families of this country, cer-
1666
tainly those on lower incomes, and is devaluing child benefit? The right hon. Gentleman has paid lip service to child benefit time and again. Twice in their manifesto the Conservatives stated their adherence to the principle of child benefit, yet it is being reduced. What will the Secretary of State do to protect the family during a period of inflation and rising unemployment?
I believe that we are entitled to an answer to the questions that I have put to the Secretary of State.
Mr. Jenkin: At the beginning of his questions the right hon. Member for Salford, West (Mr. Orme) engaged in what can only be described as a piece of political hysteria. To describe the package that I announced to the House as a fundamental attack on millions of working people is sheer rubbish. The right hon. Gentleman linked that with the 5 per cent. abatement of the short-term national insurance benefits. He will know that he was fully committed in principle to the taxation of short-term national insurance benefits. He wrote me a letter in 1976, and I was so impressed with it that I had it put into Hansard. He wrote that there was little doubt that in principle all such benefits should be taxed.
Mr. Orme: Finish it.
Mr. Jenkin: The right hon. Gentleman went on to refer to administrative difficulties. I am happy to tell him that we are coping with the administrative difficulties.
The right hon. Gentleman asked me how many people would be added to the supplementary benefit list. In 1981–82, the first full year during which all the measures that I have announced will take effect if the abatement of earnings-related supplement is included, the addition is about 30,000.
NCIP, attendance allowance and invalid care allowance are not subject to abatement.
The right hon. Gentleman mentioned the reduced rates of tax and incentives. The Budget as a whole improves the "Why work?" position for those in receipt of national insurance benefits. As we are maintaining the safety net for the poorest in the land through supplementary benefit, there is a marginal reduction in incentive for those at that level. That position is being helped by

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the large additions that we have made to the family income supplement.
The right hon. Gentleman queried the date of payment. My right hon. and learned Friend the Chancellor of the Exchequer said yesterday that 16½ per cent. is the anticipated rate of inflation between the previous uprating and the next. Therefore, inflation has been taken fully into account.
It is suggested that the measures concerning strikers' families represent an attack on the trade union movement. The amount of supplementary benefit which has been paid to the steel strikers to date is over £8 million. The Iron and Steel Trades Confederation has not—[ Interruption. ] £8 million—and the unions at the centre of that strike have paid not a penny piece in strike pay to their members. If our proposals had been in force, the supplementary benefit payments would have been about half those that have been paid.
I shall deal with health charges and prescription charges on another occasion as we are now discussing social security. I stress that 66 per cent. of prescription charges go to those who are exempt. That includes all those who would be hard hit by the increase. There is the annual £12 "season ticket" arrangement from 1 December.
The right hon. Gentleman had his fun about legality when talking about earnings and prices. The order effecting the uprating that I have proposed cannot be brought before the House until the Social Security Bill is enacted. The whole thing will be lawful.
We have given a categorical undertaking that pensioners will be protected against rises in prices. The right hon. Gentleman knows that entitlement to the earnings-related supplement in any calendar year rests on the applicant having a contribution record in the preceding fiscal year ending 31 March. The entitlement rule is being fully observed in the abolition of the earnings-related supplement in 1982.
Mr. Rooker: What about contributions?
Mr. Jenkin: The reduction and the ending of the earnings-related supplement will be one of the factors that the Government Actuary will have to take into account when considering the con-
1668
tribution rate. As the hon. Gentleman knows, it is a pay-as-you-go scheme.
I move on to child benefit. In a difficult year, when it has not been possible to maintain the full value of the effect of the tax allowances, the combined effect of the measures that my right hon. and learned Friend announced yesterday was an overall 11 per cent. increase on an annual basis of personal allowances. That is exactly equivalent to the annual rate of increase of child benefit of 18¾ per cent. over 19 months as equivalent to 11 per cent. over 12 months. The figures are closely in line. Therefore, we are entitled to call this a family Budget.
Several Hon. Members rose —
Mr. Speaker: Order. I understand that it is the intention to debate these matters on Monday next, when they will be the main burden of the debate. To be fair to those who are to participate in today's debate, I propose to call four hon. Members from each side of the Chamber before moving on to other matters.
Mr. Paul Dean: My right hon. Friend has announced a package that means a substantial increase in real terms for the social security budget. Does he agree that the extravagant language from the Opposition Front Bench is wholly irresponsible and unrealistic?
Mr. Heffer: It is the Government who have been irresponsible. This is disgusting.
Mr. Speaker: Order. We must restrain ourselves. This is a time not for debate but for elucidation of the statement. The debate will come later.
Mr. Dean: Does my right hon. Friend agree that, in view of the package, the line drawn between short-term benefits and long-term benefits will be of great importance, especially for those who have been out of work and sick for a long period?
Mr. Jenkin: I accept what my hon. Friend says. I am grateful to him for his remarks about the whole package. Many right hon. and hon. Members will know that many invalidity beneficiaries choose not to move to the pension because the pension is taxed and long-term invalidity benefit is not. That makes a

1669
nonsense of the failure to tax benefits, including the invalidity benefit. As the figures that I announced indicated, it is a much higher rate. Equally, it is right that it should be treated as part of taxable income.
Mr. Ennals: Does the right hon. Gentleman recognise that, apart from the decisions that he and his right hon. and learned Friend the Chancellor of the Exchequer have taken on prescription charges, his decision to cut back in real terms on unemployment benefit, invalidity benefit and child benefit means that he is no longer able to fulfil the proper responsibilities of the Secretary of State for Social Services, which are to protect those who are least able to protect themselves? In view of all that he said before the election, especially on child benefit, does he believe that he should continue to hold his present post?
The Prime Minister (Mrs. Margaret Thatcher): Yes.
Mr. Jenkin: My right hon. Friend kindly said "Yes". That is the answer to the right hon. Gentleman's question. I am grateful to my right hon. Friend. The package that I have announced goes the whole way to protect those in the greatest need. As the right hon. Gentleman was equally committed with his right hon. Friends to tax short-term benefits, he has no right to quarrel with the 5 per cent. abatement.
Sir William Clark: Is my right hon. Friend aware that the proposal on strike pay and the deemed £12 a week is widely welcomed in the country because it has been considered extremely unfair that those who are on strike should benefit from the taxpayer? Does he agree that the deemed £12 a week will mean that the taxpayer is picking up some of the cost of this social payment? Does he accept that it is high time that the Opposition realised that union funds and the contributions that ordinary trade unionists make to those funds should be used when members are called out on strike by their leaders?
Mr. Jenkin: I am happy to agree with my hon. Friend. I have no doubt whatever that this change will be widely welcomed in the country, not least by many
1670
trade union members who believe that it will make their unions act more responsibly.
Mr. Penhaligon: Does not the Minister realise that to deem that people have had money when they have not received it is unprecedented and must in some cases be outrageously unfair? Would it not be better for the Government to take powers so that they can work out the total sum involved and then send the bill to the trade union involved—or is the Minister afraid of the trade unions?
Mr. Jenkin: I suggest that the hon. Gentleman waits for the Bill tomorrow. Neither my right hon. and learned Friend the Chancellor nor I said anything about deeming. We are simply saying that the amount of supplementary benefit to which a striker should be entitled for his family will be reduced by £12. It will not he deemed. It will be reduced by £12. It will apply to all strikers. It is reasonable to assume that they will have made, either through their unions or individually, provision to cover themselves in the event of a strike.
Mr. McCrindle: I welcome the generous fuel assistance package announced by my right hon. Friend. First, will he confirm that it is intended that this should be paid not only to those on supplementary benefit but to those in work who are low paid and who therefore receive FIS? Secondly, will be confirm that, unlike past fuel assistance schemes, it does not depend on a particular fuel being used, but will be payable whether gas, electricity or solid fuel is used?
Mr. Jenkin: One of the great advantages of the more limited scheme this winter and the greatly expanded scheme of next winter is that they cover all fuels. It is a help to those in the greatest need with their fuel costs, whatever fuel they use. My hon. Friend is absolutely right. The help going to those in work—that is, families with children who are entitled to family income supplement—as with all FIS payments that continue, once awarded, for a year, operates as a considerable incentive for those who return to, or remain at, work.
Mr. Heffer: Is the Minister aware that most people, certainly working people, will regard these policies as sheer class policies and think that the Government are acting in a mean and callous fashion?

1671
The people will get the Government out of office at the earliest possible moment. I hope that the trade movement takes the strongest possible action to do that.
Mr. Jenkin: I am not sure whether the hon. Gentleman is advocating that the union should engage in political strikes against a democratically elected Government. If so, I should have thought that he, as a good Member of the House of Commons, would be unwise to pursue that course. The constituents of the hon. Gentleman, as much as those of any other Member of Parliament, are thoroughly fed up with the sight of people being better off out of work. The Budget and the changes I announced make a start on dealing with that.
Mr. Grieve: Referring to the contribution that may be expected from the unions towards the strike pay, is not ours the only country in Europe in which hitherto the whole of the support for those on strike has been extracted from the taxpayer? Does not this change enable us to look to the unions for a reasonable contribution and, as a result, a much greater measure of responsibility?
Mr. Jenkin: My hon. and learned Friend is right when he says that ours is the only country to do this. This is one of the measures which the Government are taking in fulfilment of their pledge to even up the balance between employers and unions.
Mr. Andrew F. Bennett: Does the Secretary of State recoil last week's debate on the Social Security Bill, and especially that on child benefit? Was not he pressed strongly by his own Back Benchers? Did not he seem to agree that child benefit was the best way to reduce the poverty trap? Did he make any attempt in the Cabinet to get more than 75p this time?
Mr. Jenkin: The hon. Gentleman would not expect me to answer that question. Perhaps I could say that the 75p is the equivalent of an increase in child tax allowance of £130. I suspect that if my right hon. and learned Friend had announced an increase in the child
1672
tax allowance of £130, he would have been applauded by hon. Members on both sides of the House. When we come to convert this into weekly payment, it is made to look much smaller.
The advantage of the child benefit is that it goes to people who are below the tax threshold and who would not be able to obtain the advantage of a child tax allowance. Therefore, it is a great improvement on that. If we increased the child benefit by the figure of £1.20, the subject of the amendment on the Report stage of the Social Security Bill, it would have cost £90 million more in the current year and £250 million more in a full year. Anybody who advocates that course must be prepared to say where that money should come from.
Several Hon. Members rose —
Mr. Speaker: Mr. Orme.
Mr. Orme: I thought that you were about to call another member of the Opposition, Mr. Speaker.
Mr. Speaker: Order. I called four hon. Members from either side, as I said I would. I always conclude with a Front Bench Member.
Mr. Orme: When the Secretary of State refers to the reduction in unemployment benefit in real terms, that has nothing to do with the principle of taxation, which would be on a fair basis and which would enable the threshold to be raised. What are the Government doing? As I stated, the Secretary of State is making a reduction in real terms. Is it not the first reduction of that kind since 1928?
Mr. Jenkin: As the right hon. Gentleman would know if he studied the public expenditure White Paper and table 5.13, at the back, the yield from taxing these short-term national insurance benefits would have been £430 million. The yield from the 5 per cent. abatement that we suggest is about £133 million, which is about one-third as much. As he was committed in principle to taxation, he cannot complain about a 5 per cent. abatement yielding one-third of the revenue.

Following is the information:

MAIN INCREASED CONTRIBUTORY AND NON-CONTRIBUTORY BENEFIT RATES

Existing weekly rate

Proposed weekly rate

£

£

Child benefit:

Each child

4·00

4·75

Child benefit increase:

First or only child of certain lone persons

2·50

3·00

Standard rate of retirement* and widows' pensions, and widowed mothers' allowance:

Single person

23·30

27·15

Wife or other adult dependant

14·00

16·30

Standard rate of invalidity pension:

Single person

23·30

26·00

Wife or other adult dependant

14·00

15·60

Invalidity allowance payable with retirement pension:

Higher rate

4·90

5·70

Middle rate

3·10

3·60

Lower rate

1·55

1·80

Invalidity allowance payable with invalidity pension:

Higher rate

4·90

5·45

Middle rate

3·10

3·45

Lower rate

1·55

1·75

Standard rate of unemployment and sickness benefits:

Beneficiary under pension age:

Single person

18·50

20·65

Wife or other adult dependant

11·45

12·75

Beneficiary over pension age:

Single person

23·30

26·00

Wife or other adult dependant

14·00

15·60

Widows' allowance (first 26 weeks of widowhood)

32·60

38·00

Maternity allowance

18·50

20·65

Attendance allowance:

Higher rate

18·60

21·65

Lower rate

12·40

14·45

Retirement pension for persons over pensionable age on 5 July 1948 and for persons over 80*:

Higher rate

14·00

16·30

Lower rate

8·40

9·80

Non-contributory invalidity pension, invalid care allowance

14·00

16·30

Increase of non-contributory invalidity pension and invalid care allowance for a wife or other adult dependant

8·40

9·80

Mobility allowance

12·00

14·50

Guardian's allowance, child's special allowance

7·10

7·50

Rate of benefit for children of widows, invalidity, non-contributory invalidity and retirement pensioners, invalid care beneficiaries; unemployment and sickness beneficiaries when claimant is over pension age

7·10

7·50

Rate of benefit for children of all other beneficiaries

1·70

1·25

* An age addition of 25p is payable to retirement pensioners who are aged 80 or over.

MAIN INCREASED INDUSTRIAL INJURIES BENEFIT RATES

Existing weekly rate

Proposed weekly rate

£

£

Injury benefit*†

21·25

23·40

Disablement benefit (100 per cent, assessment)*

38·00

44·30

Unemployability supplement‡

23·30

26·00

Special hardship allowance (maximum)

15·20

17·70

Constant attendance allowance (normal maximum), exceptionally severe disablement allowance

15·20

17·70

Industrial death benefit:

Widows' pension during the first 26 weeks of widowhood

32·60

38·00

Widows' pension now payable at £23·85 rate

23·85

27·70

Widows' pension now payable at £6·99 rate

6·99

8·15

* The rates for beneficiaries not over the age of 18 will also be increased.

† Increases for adult dependants and children will be the same as those payable with unemployment and sickness benefits, where claimant is under pension age.

‡ Invalidity allowances and increases for adult dependants and children will be the same as those payable with invalidity pensions.

MAIN INCREASED SUPPLEMENTARY BENEFIT RATES

Existing ordinary weekly rate

Existing long-term weekly rate

Proposed ordinary weekly rate

Proposed long-term weekly rate

£

£

£

£

Supplementary benefit:

Husband and wife

29·70

37·65

34·60

43·45

Person living alone

18·30

23·70

21·30

27·15

Non-householder:

Age 18 and over

14·65

18·95

17·05

21·70

Age 16–17

11·25

—

13·10

16·65

Any other person aged

13–15 years

9·35

—

10·90

11–12 years

7·70

5–10 years

6·25

—

7·30

Under 5 years

5·20

Existing weekly rate

Proposed weekly rate

£

£

Non-householder housing addition

1·70

2·15

Heating additions to supplementary benefit

0·95

1·40

1·90

3·40

2·85

Dietary additions to supplementary benefit

1·05

1·20

2·50

2·80

Blindness addition to supplementary benefit

—

1·25

Addition for claimant or dependant over age 80

0·25

0·25

MAIN INCREASED WAR PENSION RATES

All ranks receive the same increases, officers' rates being expressed in pounds per annum.

DISABLEMENT BENEFITS

Existing weekly rate

Proposed weekly rate

£

£

Disablement pension for private at 100 per cent, rate

38·00

44·30

Unemployability allowances:

Personal allowance

24·70

28·80

Increase for wife or other adult dependant

14·00

16·30

Increase for child

7·10

7·50

Comforts allowance:

Higher rate

6·60

7·70

Lower rate

3·30

3·85

Allowance for lower standard of occupation (maximum)

15·20

17·70

Constant attendance allowance:

Special maximum

30·40

35·40

Special intermediate

22·80

26·55

Normal maximum

15·20

17·70

Half and quarter day

7·60

8·85

Age allowance with assessments of:

40 and 50 per cent.

2·65

3·10

Over 50 and not exceeding 70 per cent

4·10

4·80

Over 70 and not exceeding 90 per cent

5·90

6·85

Over 90 per cent

8·20

9·60

Exceptionally severe disablement allowance

15·20

17·70

Severe disablement occupational allowance

7·60

8·85

Existing annual rate

Proposed annual rate

£

£

Clothing allowance:

Higher rate

51·00

59·00

Lower rate

32·00

37·00

DEATH BENEFITS

Existing weekly rate

Proposed weekly rate

£

£

Widows' pension—private's widow: widowers' pension:

Standard rate

30·20

35·30

Childless widow under 40

6·99

8·15

Rent allowance

11·50

13·40

Age allowance for elderly widows:

Ages 65–69

2·95

3·45

Age 70 and over

5·90

6·90

Adult orphans

23·30

27·15

FAMILY INCOME SUPPLEMENT

Existing weekly level

Proposed weekly level

£

£

Family Income Supplement:

Prescribed amount for family with one child (income below which FIS is payable)

56·00

67·00

Increase in prescribed amount for each additional child

4·50

7·00

Maximum weekly amount for a one-child family

13·50

17·00

Increase in maximum amount for each additional child

1·00

1·50

BILL PRESENTED

  PORT OF LONDON (FINANCIAL ASSISTANCE)
  Mr. Norman Fowler, supported by Secretary Sir Keith Joseph, Mr. Secretary Prior, Mr. Secretary Heseltine, Mr. Secretary Nott, Mr. Nigel Lawson and Mr.
  1678
  Kenneth Clarke, presented a Bill to provide financial assistance for and in connection with measures taken by the Port of London Authority to restore the profitability of their undertaking by reducing the number of persons employed by them: And the same was read the First time; and ordered to be read a Second time tomorrow, and to be printed. [Bill 176.]

  ORDERS OF THE DAY
    WAYS AND MEANS
    Order read for resuming adjourned debate on Question [ 26 March].

    AMENDMENT OF THE LAW
    That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance; but this Resolution does not extend to the making of—

    (a) any amendment with respect to value added tax so as to provide—

    (i) for zero-rating or exempting any supply;

    (ii) for refunding any amount of tax;

    (iii) for varying the rate of that tax otherwise than in relation to all supplies and importations; or

    (iv) for any relief other than relief applying to goods of whatever description or services of whatever description; or

    (b) any amendment relating to the surcharge imposed by the National Insurance Surcharge Act 1976 and applying to some only of the persons by or in respect of whom the surcharge is payable.—[ Sir G. Howe.]

    Question again proposed.

    BUDGET RESOLUTIONS AND ECONOMIC SITUATION
    4.27 pm
    Mr. Denis Healey: I make no complaint about the style of the Chancellor's Budget Statement. The reason why it was the dreariest speech for many years is that every proposal of significance except one—the infamous increase of prescription charges to £1, of which I shall have more to say later—had been assiduously leaked to the press over previous weeks by Ministers and officials. Apart from those leaked proposals, it was a dismal catalogue of trivia, of little consequence. However, the fact that the Budget consists entirely of stale food makes it no more appetising. It is essentially another enormous dose of a medicine that has already made the patient as sick as a dog. The result will be to turn the 1980s—a decade that should have been golden with the benefits of North Sea oil—into a re-run of the hungry 'thirties.
    Today ours should be the most prosperous economy in the Western world.
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    North Sea oil is already adding 5 per cent. to our GDP. It is giving us a benefit of £8 billion to our balance of payments and adding £4 billion to Government revenue. None of those advantages was enjoyed by the prev;ous Government, which suffered a cut of 5 per cent. in GDP because of the first oil price increase on taking office and an increase in our balance of payments deficit of £2½ billion. Instead of our prospect being better than that of our competitors, it is infinitely worse. The United Nations Commission has just shown that the rest of Western Europe can expect an increase in output of 2½ per cent. this year—or 2·4 per cent. to be precise. Her Majesty's Government expect a fall in output in this country of 2½ per cent. Instead of a massive surplus on our current account the Government expect a deficit of £2¾ billion.
    Even those figures appear in the forecast only after a long process of massaging by Ministers. Even if we accepted them as true, what a prospect this offers for the rest of the economy, in which nearly all British men and women must earn their living. In the rest of the economy outside the sector that involves North Sea oil there will be a fall in output of at least 5 per cent. in the coming year and a current account deficit of over £10 billion.
    The main victim of this fall in output will be manufacturing industry. The fall will not be so severe in the service and distribution industries, but the fall in output in manufacturing industry is bound to be well over 5 per cent. in the coming year, and may be as high as 10 per cent.
    Here I come to an interesting detail which nobody seems to have picked up. The Red Book, "The Financial Statement and Budget Report", always in the past gave an estimate of the increase in manufacturing output expected in the coming year. That estimate has been suppressed in this year's forecast. All previous forecasts have given an estimate of the breakdown between private and public capital investment. That estimate has been suppressed this year. There can be only one reason, and that is that the estimates are too horrific to he revealed.
    The Government have left us no light whatever at the end of the tunnel because they have also published—greatly, I

    1681
    gather, to the Chief Secretary's dismay—medium-term forecasts that show the gross domestic product growing at only 1 per cent. a year for three years after this collapse in output in the year immediately ahead. In other words, after four years we shall scarcely have recovered the loss in output that the Government think we shall suffer this year, and to the extent that we do we shall owe it entirely to growth in the output of North Sea oil.
    The fact is that the Government are asking the House of Commons to approve a programme for the terminal decline of British manufacturing industry. There is nothing to look forward to at the end of the tunnel except the prospect—dear, no doubt, to the Prime Minister's heart—of a £3½ billion tax give-away in an election year, and if the Government try to buy votes in 1984 by this means they know that the money will all be spent on imports, because by then large areas of our manufacturing industry will have disappeared for ever and what is left will be incapable of meeting demand, because investment will have been falling for five years; it will face the future with clapped-out machinery.
    Yet this is the Budget that the spokesman for the CBI welcomed yesterday as tough but fair. I wonder when he is going to stop acting as the Prime Minister's poodle and start representing the interests of the industrial companies that form his membership.
    The fact is that manufacturing industry—every hon. Member on the Government Benches who has any contacts in industrial business will know this—is now facing an asphyxiating cash squeeze and the prospect of massive and mounting bankruptcies before this year is out. Indeed, the only firms in Britain that can look forward to an improvement in their prospects are those specialising in insolvencies and those specialising in debt collection—so I was told when I attended the Institute of Credit Management's annual luncheon only last week.
    Even for a devotee of market economics and monetarist dogma this prospect must be a disaster. Last year the Chancellor made what I think we all agree now was the crass error—I said so at the time—of doubling the rate of value added tax, under the impression, as he repeated the other day, that that
    1682
    was a once-for-all increase in prices. I hope that he has had a chance to read the Bank of England paper on this matter which was published last week and which shows how fatuous an illusion that was.
    This year the Chancellor is making an even more crass error, because he is starting what he genuinely wants, I believe, to be able to see as a four-year recovery programme with a stunning karate chop to the neck of British industry from which it may never recover. The first year of this Government's presence in charge of our affairs saw a doubling of the rate of inflation, interest rates raised to an all-time record and held at that peak for longer than interest rates had ever peaked in the past, unemployment rising in the last six months by 150,000, and the worst strike record since 1926.
    This reflects a policy that had scarcely been launched last year. If we look at the consequences of the Budget this year and the programme to which Her Majesty's Government are committing themselves for the next four years we see that the outlook is far grimmer than the misery that the British people have already suffered since the last general election. Indeed, if the Government believe, as they are supposed to believe, in the theory of rational expectations, I ask the Chancellor to reflect on the fact that he is presenting the British people with a prospectus of decline. How can he, on his own theories of the importance of psychology in our economic affairs, expect the supply side of the economy to grow when he has told industry that output is to collapse this year and that there will be no recovery in manufacturing output for at least four years from now?
    The prospects of an improvement on the records of the last 12 months are dim indeed. The Governor of the Bank of England talked the other day only about hoping to achieve lower nominal interest rates in future years. When the Financial Secretary was questioned about this statement he said that the Government had concealed the nature of the forthcoming Budget from the Governor of the Bank of England and for that reason the latter had made a more pessimistic forecast than was justified. I should be very surprised if that were indeed the case. But the other governor,

    1683
    the governor of the Chancellor of the Exchequer, the Prime Minister, said only last week in an article in a German newspaper that interest rates must remain high for possibly another two years. Is this the prospect to which the right hon. Gentleman is treating a British industry that he wants to galvanise into entrepreneurship, if I may quote the words of the Secretary of State for Industry some time ago?
    The fact is that these intolerably high interest rates have done nothing so far to control the money supply. Their purpose is to reduce bank lending to companies—that is what the Chancellor told us—yet bank lending to companies remains high and is likely to go higher, precisely because of the effects of the Budget itself on companies' cash flow. The only real result of the exceptionally high interest rates is to worsen industries' cash position still further by making it more expensive for them to hold stocks—they are not going to invest anyway in this situation—and make it more difficult for them to compete both at home and abroad by keeping the value of the pound far above the level that is justified by our comparative economic performance. In other words, these high interest rates are driving two more heavy nails into the coffin of British industry.
    There is no disagreement, I think, on either side of the House on the reason for this appalling prospect. It is that the fiscal and monetary policy of the present Government is far more severe than any other Government in the Western world thinks necessary. The Government have so far applied their monetary policy with unparalleled incompetence. The last year before the election, up to April 1979, as the Red Book shows us, sterling M3 rose by 10.7 per cent.—about the middle of the range that I had set for it. It rose a little faster in the last six months, but was still within the upper limit of 12 per cent., according to the Red Book. It was under 12 per cent.
    During the first six months after the Chancellor came to power it rose by over 14 per cent., and we have had to add to that, according to the Red Book, 2 per cent. or 3 per cent. because of evasion of the corset by acceptances, bills and other means—a practice that developed real economic importance only after May
    1684
    last year, according to the Red Book. [ Interruption.] I am quoting the Red Book published by the Government, and the Financial Secretary to the Treasury must take responsibility for the truth of all the facts that I have just laid before the House.
    The Government are sensibly—although they have rather disguised this—somewhat relaxing their monetary targets in the Budget by rebasing the 7 per cent. to 11 per cent. range on February. As the Financial Times points out this morning, that means that the money supply will grow 2½ per cent. to 3 per cent. more than it would have done if the Government had stuck to the proposals that they put before us last November, and it will have to, because the compulsion of the corset will bring flooding back into the published figure the money that has been disguised under "acceptances" in the past.
    Nevertheless, the money supply targets are far too high still for a period when the retail price index is set to increase to above 20 per cent. I do not believe that the Government will achieve these targets any more than they have achieved the targets that they set themselves over the past 12 months.
    The biggest error in the Budget economically this year is the fiscal error of aiming to cut the public sector borrowing requirement in money terms at a time when inflation has risen by 20 per cent., when the economy is working far below capacity, and when the savings ratio, according to the Central Statistical Office publication two days ago, rose to 18½ per cent. in the last quarter of 1979—a staggering figure of which the Chancellor seemed to be unaware when I questioned him on it in the House last Thursday.
    No intelligent monetarist would justify so rigorous a PSBR in this situation. The London Business School, from which the Chancellor has recently drawn his chief economic adviser, has published its views that the PSBR in the coming year should be set at £10 billion if the fall in output is expected to be 2 per cent., and should be set higher if the fall is expected to be greater. as indeed it is even in the Government's forecast.
    It is very difficult for me and for the monetarists of the London Business

    1685
    School to understand why the Government should have defied this type of advice, which is coming to them from many quarters. As far as I can judge from what the Chancellor said, the reason is that he seems to think that there is a direct and predictable relationship between PSBR, the growth of money supply and interest rates. Let me tell him that that is bunk. I had a PSBR running at nearly twice the present rate as a percentage of GDP in 1974 and 1975, but I kept the money supply at 10 per cent. each year, and interest rates fluctuated between 9 per cent. and 13 per cent.
    In 1978–79, the last year I was in office, which the Government now describe as one of unparalleled profligacy—I have demonstrated how much less profligate it was in money supply terms than is the Chancellor's record in his first year—the PSBR was 6·4 per cent. of GDP, 50 per cent higher than the Government are now planning, yet the money supply was kept at 10·7 per cent. and interest rates averaged about 10 per cent.
    Japan has always had a fiscal deficit far larger than ours. In 1978 it was 13·6 per cent. of GDP. Yet Japan has always succeeded in having extremely strict control of her monetary growth. It is because the Government seem to be totally unaware of these facts that I describe them as being devoted to punk monetarism. People have asked what "punk monetarism" is. I will tell them. "Punk monetarism" is a monetary policy based on a half-baked understanding of half-baked dogmas. The Government are crucifying the British people and British industry on a completely false dogma, attachment to which would not justify an A-level in economics. The Chancellor would not even have got through the 11-plus examination.
    The only compensation that the Chancellor offers to the business men whom he is about to bankrupt is that they will be able to start up again in their back yard a little more easily than would have been the case a year ago, or, if they happen to live in an area of great dereliction, they will be able to make a beeline for one of his new combat zones. From what he said yesterday, we understand that he is planning to set up in Britain a series of Californian mining towns in which "everything goes". He is to litter the country with Sohos. About the only
    1686
    advantage that we shall derive from this experiment is that it may at last become possible to get a passport to Pimlico.
    I turn to the method that the Chancellor has chosen for cutting the public sector borrowing requirement. It is mainly to be achieved by further cuts in public expenditure, although what emerges from the Red Book—the Chancellor modestly concealed this from us yesterday—is that the Budget is quite highly deflationary. It involves deflation of £2 billion altogether, £1 billion through a failure to index taxes in line with inflation and another £1 billion at least through public expenditure cuts. But if his cash limits bite, as he says they will, expenditure cuts will be Eli billion, even without the cosmetic £500 million from the sale of assets, which does not convince anyone, not even his warmest supporters in the City of London.
    Some of the cuts are phoney, like the sale of assets; some will not happen, like the cuts in bureaucracy that the Government promised a year ago and of which we had illustrations in Committee recently. Some—this is more serious—are indiscriminate, because by holding cash limits at a level that according to the Government's figures will be at least 2 per cent. below the level of inflation and I guess will turn out to be 4 per cent. or 5 per cent. below the level of inflation, he will force all public authorities—national, local, nationalised industries, the National Health Service, the lot—to make further spending cuts if they take his advice.
    Many of those spending cuts will be achieved—such is the topsy-turvy world in which he lives—by increases in charges. It will mean another big boost to the retail price index through increases in rents, rates, fuel and electricity charges and fares, because there will be no other way in which those authorities are able to achieve the savings. We are set for another great increase in the RPI as a result of this indiscriminate tightening of cash limits—
    Mr. John Bruce-Gardyne rose —
    Mr. Healey: What is more serious is that in some cases these cuts in cash limits will be achieved through cuts in capital spending, which, in the case, for example, of the Central Electricity Generating Board, will mean forgoing investment in new sources of energy that the country desperately

    1687
    requires. The public expenditure White Paper shows that many of the cuts will be achieved by savage reductions in the standard of the public services. The local authorities tell us today that there can be no net new council building over the next four years. All the leading education authorities—not just the NUT, but the associations of head teachers and deputy teachers—say that there will be a further decline in education standards just at the moment when the Government's own strategy desperately requires an improvement.
    The biggest single thrust in the public expenditure White Paper is to put the burden of savings on those least able to bear it—the old, the sick, children, the poor and the unemployed. The Secretary of State for Social Services has just explained in detail how he proposes that this shall be done.
    Mr. Bruce-Gardyne: I am most grateful to the right hon. Gentleman for giving way. I should like to bring him back to the point where I was trying to intervene. He talked about the proposition that cash limits should be used to some extent to not make good the going rate of wage increases in the public sector. He will recall that his right hon. Friend the Member for Heywood and Royton (Mr. Barnett) proposed exactly the same 15 months ago and was roundly denounced by the then Prime Minister for his pains. Will the right hon. Gentleman now tell the House—he did not at the time—whether his right hon. Friend the Member for Heywood and Royton had his support in what he was doing then? If so, why does he object to a similar policy today?
    Mr. Healey: With respect, the hon. Gentleman is entirely wrong in his interpretation of what my right hon. Friend said. I see my right hon. Friend sitting in his place, wreathed in his normal geniality. I have no doubt, Mr. Deputy Speaker, that his charm and ebullience will lead you to give him an opportunity of explaining to the House later precisely what he said, precisely what he did, and precisely what followed. [HON. MEMBERS: "Answer".] I have just answered.
    Mr. Peter Bottomley rose —
    Mr. Healey: I shall give way in a moment.
    Sir William Clark rose —
    Mr. Healey: No, I shall not give way. Let me run over—[ Interruption]—I am well aware, Mr. Deputy Speaker, that have been running over a number of Conservative Members. I should now like to run over the ways in which the Government are planning to punish the weak and the poor.
    The first example is the unforgivable further increase in prescription charges to £1 next December. We shall be debating this matter in more detail on Monday. I would merely say now that this increase, in the strictest sense of the word, is cheating the sick. The Conservative Party stated in terms, when it fought the last election and was seeking votes from whoever might be prepared to give them—I quote from a statement issued by the right hon. Gentleman, who is now Paymaster General:
    "Lie No. 9: There are Tory proposals for higher prescription charges.
    Truth: 'We have no intention of increasing … such charges' says Mrs. Thatcher."
    There could not be a clearer example of straightforward electoral deceit than the Government's announcement on prescription charges and what they have already done twice since taking office.
    The next cheat that the Government are carrying out is to cheat families by increasing child benefit by only 75p, after 18 months without any increase, when at least £1.20 is needed to keep pace with inflation. I know that the hon. Member for Woolwich, West (Mr. Bottomley) has asked for an increase of £1.40.
    Mr. Peter Bottomley: Does the right hon. Gentleman feel at all responsible for this course of events? Where was he on 7 July 1975 when all the Labour Members present voted against indexation of child benefit?
    Mr. Healey: We increased child benefit continuously after we first introduced it. We undertook to increase it last November. The present Government made no increase last November. We made absolutely clear that we would increase child benefits at every Budget by at least the amount by which child tax allowance would have increased had it remained.
    Mr. Tim Eggar rose —
    Mr. Healey: Oh, sit down.
    Mr. Eggar: On a point of order, Mr. Deputy Speaker. I seek your guidance. Is it in order for the right hon. Gentleman to refer to hon. Members in that way?
    Mr. Deputy Speaker (Mr. Bernard Weatherill): Unusual. I would say.
    Mr. Healey: I apologise most humbly to you, Mr. Deputy Speaker, for appearing to address you. As you may recognise, my remarks were addressed to another.
    The refusal to raise child benefit in line with—
    Mr. Peter Bottomley: You all refused.
    Mr. Healey: No, we did it. We may have voted against indexing—
    Mr. Bottomley: That is it.
    Mr. Healey: But we raised family allowances in line with inflation. This is what matters. We were prepared to do more. We committed ourselves to do more, but the Government won the last election on a series of lies. I should perhaps say "the Conservative Party". I am not sure how the doctrine of collective guilt applies to Members of Parliament after they have been elected.
    The fact is that the Conservative Party told a series of lies before the last election. The best way this can be expressed is by quoting the remarks of the Secretary of State for Social Services in June 1977 before the election in stating that his party was committed "without any ifs or buts" to a full child benefit scheme. The right hon. Gentleman said:
    "first, because that is the way to restore the position of families. Secondly, it is the best way to ease the poverty trap. Thirdly, it is the best way to help the poorest families in work—those who earn their poverty. Fourthly, it is the best way to reduce the nonsense of people being much better off out of work. Fifthly, it is the best way of reducing the dependence of families on means tested benefits."
    We agree with all those statements. We acted when in power to fulfil them. The present Government could have done so this year without any economic disadvantage to their plans. They could have raised child benefit to £1·20 simply by imposing a gentle levy on the excess profits of the clearing banks. They have chosen not to do so, although, in his
    1690
    voyeur capacity, the Chancellor of the Exchequer said once again that he is going to look at the matter. I ask the hon. Member for Woolwich, West not to show courage but simply to point out to the Chancellor that there is still time, while the Finance Bill is going through the House, to speed up his look at the profits of the clearing banks, impose a tax on those excess profits and spend the proceeds on an increase in child benefit. I hope that when we make this proposal he and the 60—I think that is the figure—of his hon. Friends who share his views will have the wisdom, as well as the courage, to support us.
    Mr. Peter Bottomley: One point that a number of hon. Members have been trying to discover is how long it takes. administratively, to put forward an increase in child benefit. Can the right hon. Gentleman tell the House?
    Mr. Healey: My own experience—I have a good deal—is that it takes about five months as a rule, although I was surprised to discover, as was the Chancellor, that it is sometimes possible to twist the arms of civil servants and get a change of this nature carried out faster. We did that in the case of the first increase in old-age pensions after taking office in 1974. We did something similar in making one of the increases in the national insurance surcharge. It may be possible, therefore, to act in a shorter time. It would certainly be possible to take a decision in the next month or so to make an adequate increase in November. There would be no bureaucratic obstacle whatever to that.
    I come to another aspect of Government cheating—cheating the old. The Government have told us that they have decided that they do not propose to restore the 1·7 per cent. which the law required them to pay in addition to what they paid last year because they underestimated the increase in earnings. Secondly, they are raising the old-age pension in line with the rise in prices last year in a year when the rate of inflation will be not 16½ per cent. but something like 20 per cent. Thirdly, the effect of the abolition of the lower rate band will be to require over 1 million pensioners to pay an extra 5p in the pound on every little bit of extra income or earnings they manage to obtain. That means a severe

    1691
    fall in the living standards of many pensioners.
    The Government are also cheating the sick and the unemployed by cutting £1·50 off the increases in sickness and unemployment benefit which they would otherwise be allowed. They are dong the same with young mothers by cutting the maternity allowances to the same extent. They are cheating those who paid earnings-related supplement in the expectation of having their unemployment pay raised in relation to their income. The result will be that the 500,000 additional men and women who will be thrown out of work in the next 12 months by the Government will see their income cut at a stroke, through no fault of their own, from £98 a week on average to £40 a week.
    The final proposal of the Government in this context is to punish the families of men and women who are on strike in a way in which no Government—not even this Government—ever proposed to punish the families of murderers, rapists and thieves. I can tell the Conservative Party that the Government are doing this for no economic, social or industrial reason; they are doing it out of sheer vindictiveness.
    The best proof of that is that when the proposal was put to the Conservative Party conference in 1973 the present Secretary of State for Industry, no less, said that to adopt that proposal would be to return to the social standards of Mr. Bumble and Mr. Gradgrind. He was right. If Conservative Members have no moral compunction and choose to ignore the disastrous effect on industrial relations that this proposal will have, I ask them to reflect on what the Secretary of State for Industry said to that conference on 12 October 1973 when he was appealing simply to Conservatives' sense of political interest.
    I quote the right hon. Gentleman's words because they are well constructed and give a revealing insight into the general attitude of intelligent Conservatives to these problems. The right hon. Gentleman said:
    "Withdrawing a bone from a dog's mouth has its difficulty particularly when the dog has a wife and children. This Conference would be the first to howl if we really did have pictures on television of children going hungry for lack of benefit—perhaps because their striking fathers were on low pay and had
    1692
    not been able to save, perhaps even because their striking fathers had not made the necessary arrangements for saving for the purpose. But this Conference would object strongly if children were shown going without food."
    I hope that the Conservative Party is still capable of listening to appeals of this type. If it is not, it is not worthy to represent the people of this country.
    Mr. John Biggs-Davison: So that we may be able to form a fair judgment, will the right hon. Member tell us what is the position in other countries, including countries with social democratic Governments?
    Mr. Healey: If the hon. Member was prepared to follow me in copying the practices of social democratic Governments in other countries in all respects, I would consider following their practice in this respect. In this country an attempt to legislate in the way proposed by the hon. Gentleman—which was rejected by Conservative Ministers only eight years ago for reasons I have just described to the House—would be a disaster and would bring moral obloquy upon them. I make that prediction without any fear of being disproved in the event.
    This consistent attack on the weak and under-privileged through public expenditure cuts is being carried even further in the Government's tax proposals, which involve an increase, according to the Red Book, of £1 billion in the real burden of taxation. There is not much left of the Chancellor's first Budget, is there?
    The Red Book points out that the abolition of the lower rate band cuts the value of the increases in the indexing required by the Rooker-Wise amendment from 18 per cent. to 11 per cent. The whole of the tax advantage for ordinary people is cancelled out by the increase in duties on drink, tobacco and petrol. That is happening at a time when in April there will be massive increases in rents, rates, gas and electricity charges and prescription charges.
    The only real benefit—and the Government's figures show this clearly—from the present Budget will go to people earning over £15,000 a year and, of course, that benefit will increase substantially in money terms for everybody above that level. It is easy with benefits of this nature to be able to afford, as could the young man I heard speaking on the radio this morning, the glass of pink

    1693
    champagne when one is flown to New York on Concorde. This inequity is carried further by cuts in capital transfer tax and cuts in capital gains tax, both of which give further uncovenanted benefits to the wealthy.
    The most symbolic of the Government's actions is the decision to increase DHSS staff by 1,000 in order to recover a few million pounds from the people they call the scroungers on social security. It was discovered by my hon. Friends a day or two ago when questioning the Minister concerned about this that the figures the Minister had were bogus to a disgraceful degree. He was basing figures for social security scrounging on the amount of pilfering that takes place in Marks and Spencer—a store which, incidentally, none but the middle class can afford to frequent these days.
    At the same time, I hear that the staff of the Inland Revenue is to be increased by 1,500 to collect tax from people who are deemed to have been paid £12 by their trade union when they were on strike. The head of the Inland Revenue staff federation, however, thinks that it will be well nigh impossible, for practical reasons, to implement that collection.
    At the same time as the Government are increasing the staff in the DHSS and the Inland Revenue in order to pursue the families of strikers and those on benefit, they are cutting the numbers of staff who are devoted entirely to recovering some of the billions of pounds which are lost every year through tax evasion.
    While all this agony is being inflicted on the poor and weak in our society, the Government have announced two surprising decisions in their White Paper. The first is to increase defence spending by 3 per cent. a year for the next four years in real terms over a period when there will be no real growth in our economy. When the Minister replies I hope that he will tell us—no doubt his advisers in the officials' box can scrabble for the figures immediately—whether it is not the case that, as a result of this White Paper, Britain will be spending before 1984 a higher percentage of GDP on defence than the United States.
    According to the White Paper, the Government are taking no account of a reduction in our contribution to the Common Market budget. I assume that the
    1694
    Government have set themselves a target of a reduction of about £1,000 million—£200 million or £300 million below the net cost to us which the Prime Minister promised to get rid of.
    I am sure that the Chief Secretary will view the following suggestion sympathetically. Why do not the Government announce now that a £1,000 million reduction in our Common Market contribution will form a firm basis in the Government's Budget calculations for the next four years and that they will make good any shortfall which arises in negotiations by an appropriate reduction in our VAT contribution?
    The Prime Minister has already said that she is prepared to do that if she cannot get what she wants by any other means. She used the words "in the last resort." Why do not the Government give meaning to that undertaking by including that calculation in the Budget arithmetic? I cannot see anything to prevent that. I can see nothing that would more powerfully concentrate the minds of those with whom we are about, some day, somewhere, to negotiate.
    I have explained why I think that the Budget will have a catastrophic effect on the economy. Its effect on our society will be no less catastropic. It contains a succession of mean, vicious and vindictive measures which are calculated to cause unnecessary suffering to the poor, the old, the sick and the unemployed. They are calculated to enrage those who are close to the poor, the old, the sick and the unemployed. The effect can be only to divide our nation at a time when we need unity; to create despair and apathy when, above all, we need hope and determination.
    Until I heard the Chancellor yesterday, I thought that the House agreed, without party distinction, that the duty of any British Government is to wage war on poverty, on unemployment and on sickness. However, the Government have set themselves the task of waging war on the poor, the unemployed and the sick. It is no wonder that a Conservative Member said, at the meeting held after the Chancellor sat down yesterday, that it was a "real Tory Budget at last".
    The Tory Party fought the last general election on an appeal to fear and greed. It has dropped the appeal to greed because it has nothing to offer the greedy

    1695
    any more. There is nothing left but the appeal to fear. I ask the House to reflect on the words of Aneurin Bevan, who said:
    "Which is the more productive—the discipline of fear or the sustained energy of confidence?"
    We have no doubt about our choice, and I believe that the country supports us.
    5.13 pm
    The Chief Secretary to the Treasury (Mr. John Biffen): Budget debates have enduring characteristics. One of them is the contribution that we expect and receive from the right hon. Member for Leeds, East (Mr. Healey). His speech was a blend of pugnacity, foreboding and very selective charm. To that was added humour. We heard the slightly aged joke about punk monetarism. As the right hon. Gentleman elaborated his policies I felt that the judgment was coming from Johnny Rotten himself.
    Another characteristic is that in the last 20 years there has been an increasing anxiety about inflation. It has come to dominate economic debates. Naturally, in the Chamber that issue underlines political differences, as it should. I should be the first to accept that a mindless consensus is the enemy of clear-sighted government. None the less, there is evidence of shared, albeit limited, assumptions, that could serve us well in the debate.
    I was struck by the remarks of the Governor of the Bank of England at the recent presentation to The Guardian "Young Business Man of the Year". He said:
    "Monetary policy cannot be divorced, any more than other forms of policy, from the hurly-burly of politics. But it is, perhaps, useful to remind you that our present monetary policy has more than an accidental resemblance to the policy pursued under previous Administration's."
    Of course, that is true. The watershed in post-war economic debate is marked by the speech of the Leader of the Opposition in the somewhat unpromising circumstances of a Labour Party conference on 28 September 1976. He said:
    "We used to think that you could just spend your way out of a recession and increase employment by cutting taxes and boosting Government spending. I tell you in all candour that that option no longer exists and that, insofar as it ever did exist, it worked by injecting inflation into the economy."
    Mr. Russell Kerr: Sid Vicious.
    Mr. Biffen: I was quoting the Leader of the Opposition and he is now reviled as "Sid Vicious". I may have to turn to the Chair for protection.
    Shortly after that Labour Party conference the right hon. Member for Leeds, East said:
    "We must, therefore, aim at a steady and continuous reduction in the size of our PSBR."—[ Official Report, 30 November 1976; Vol. 921, c. 716–7.]
    The following month, when the right hon. Gentleman was penning his essay to the International Monetary Fund, he said:
    "A reduction in the PSBR will go a long way to improve our ability to control the rate of growth in the monetary aggregates, and will help to reduce the level of interest rates"
    All that resembles a litany of economic rectitude. There was a moment when I hoped that the right hon. Member for Leeds, East would follow the traditions of that other great Yorkshire Socialist Chancellor, Philip Snowden. I feel a shade disappointed this afternoon. Despite the evident opportunism displayed by the right hon. Gentleman and the Labour Party in their release from office, I assert that there has been a broad understanding about the need to redirect taxation, public spending and borrowing as a means of reducing the rate of inflation.
    The Budget is significant. It is related to the borrowing and spending issues. As Chief Secretary, it is appropriate for me to speak briefly about the public expenditure White Paper which, by coincidence, appears with the Budget. I understand that the Leader of the Opposition is worried because the White Paper appeared with the Budget. It is a House of Commons matter and the House generally should make its views known.
    Let us consider some of the key spending programmes. I do not wish to be unduly provocative but I should like to reflect upon Aneurin Bevan's words. He said:
    "The language of priorities is the religion of Socialism"
    The White Paper is no bible of Socialism. It considers the key issues of public spending in the context of making a choice of priorities. That choice, however difficult, is the unavoidable and mature responsibility of the Government. No Government can abdicate that and have

    1697
    any responsibility for public spending, at whatever its level.
    Mr. Eric S. Heffer: Is the Minister aware of another Bevan statement, to the effect that Labour Governments have to be bold and audacious in dealing with the capitalist system?
    Mr. Biffen: Yes. The hon. Gentleman was addressing me although I was the proxy for his Front Bench. Bevan also said that people who walked down the middle of the road get run over.
    Mr. Helfer: That is right.
    Mr. Biffen: We could have an entertaining teach-in on what messages might be provided by that great, democratic Socialist. I hone that i shall be excused if I turn to a less entertaining prospect, namely, public spending.
    The right hon. Gentleman referred to defence. The expenditure White Paper indicates that the Government intend to fulfil their election commitment to increase defence spending. In February of last year, the right hon. Member for Sheffield, Park (Mr. Mulley) issued the final defence White Paper of the former Labour Government. One passage was especially striking. It read:
    "as seen by Western eyes, the growth in quantity of the Soviet forces … together with continued qualitative improvements, has extended their capability well beyond what can he considered necessary for purely defensive purposes."
    With the subsequent developments in Asia, who can doubt the wisdom of those observations? It is always a matter of balanced political judgment about what premium of national security should be paid for by the defence budget. We are resolved that, in the increasingly uncertain world of today, that premium must be increased.
    On health, we have stood by our election pledge to keep to the level of spending planned by our predecessors. In constant prices, the gross figure rises from £7,900 million in 1979–80 to £8,500 million four years hence. These gross amounts are partly offset by income from charges.
    Since 1948 the proportion met from charges has varied. In 1969–70, the last year of the then Labour Administration, it was 3·3 per cent. In 1980–81 it is
    1698
    expected to be 3·35 per cent. Thus, all that the present Government have one is to return to a position barely different from that which the Labour Government left in 1970.
    We wish to encourage private voluntary effort in the Health Service.
    Mr. Frank Hooky rose —
    Mr. Biffen: I shall give way in a moment. The Budget speech pointed to substantial changes in the tax arrangements for charities. We hope that the Health Service will benefit fully from these concessions.
    Mr. Hooley: No doubt the Minister is aware of the demographic change and the substantial increase in elderly people, who make considerable extra demands on the Health Service. Has he taken that into account when giving his percentages?
    Mr. Biffen: That is a fair point, but one that does not affect these statistics. They demonstrate that a Labour Government—throughout whose life the right hon. Member for Leeds, East was the Secretary of State for Defence—had their public health spending supported by charges broadly similar to those that are envisaged by my right hon. and hon. Friends.
    The Health Services Bill now before Parliament will facilitate the raising of local funds and continue efforts to streamline and make the Health Service more efficient. That could result in the release of more funds for direct patient care.
    Expenditure on the fight against crime is planned to increase in real terms. Police recruitment is up following the implementation of the recommendations of the Edmund-Davies inquiry into the pay of the police. The plans allow for a continuing increase in numbers.
    In the prison service we are continuing to provide for improvements in conditions and art increase in capacity.
    I turn to social security. The Budget embraces both protected welfare spending, such as retirement pensions, and programmes where we have sought economies. In 1980–81 expenditure on the social security programme will be nearly £20,000 million at 1979 prices. That is 25 per cent. of total public expenditure. Ten

    1699
    years ago it was £12,000 million, or 18 per cent. of total public expenditure.
    Making allowance for the replacement of child tax allowances and family allowances by child benefit—which distorts the picture somewhat—expenditure on social security has grown by 50 per cent. since 1970–71, while total public expenditure has grown by about 30 per cent., and national income by 15 per cent.
    I recognise that that is partly because the number of beneficiaries, the pensioners and the unemployed, have increased. But the trend is worrying. It must be curbed if the social security budget is not to crowd out other legitimate public spending and impede tax reforms.
    That means that we have to shape our social security policies to direct help to the old and those in greatest need. Thus, we have retained price protection for pensioners, increased the rates of supplementary benefits in line with the expected rise in the cost of living, given more to those on family income supplement and one parent families, and increased child benefits.
    The increase in child benefit to £4.75 will disappoint those who wanted to see it indexed to the movement of prices—actual and expected—from April 1979 to November 1980, or those who wanted to see real improvement. My right hon. Friend the Secretary of State for Social Services gave the answer to the critics in the debate at Report stage of the Social Security Bill, when he drew attention to public expenditure costs. That is the main answer to the point.
    We have responded to the widespread call for changes to curb social security expenditure. To this end, we made the decisions announced by my right hon. Friend the Secretary of State for Social Services earlier this afternoon. As the House well knows, these concern the future of earnings-related supplement and restricting the increase in the adult rates of certain benefits to five percentage points below the movement of prices. These are matters of acute controversy, and that I fully recognise. They will naturally feature in the continuing debate next Monday, when my right hon. Friend will speak.
    I wish to make these observations from a public expenditure point of view. The decisions have not been taken out of atavistic hostility towards the Welfare State.
    1700
    They rest on a simple truth that everyone must acknowledge, namely, that expenditure on social security must be related to the nation's taxable capacity.
    Even now, on current expectations, expenditure in 1982–83 on social security will be higher than at present. We have sought to check the movement upwards and have stabilised the level of expenditure. Within that, we have concentrated help on the most vulnerable sections of the community. I must repeat that the ability to spend more on social security rests on the country's ability to increase its prosperity.
    Finally, in respect of the White Paper, I wish to consider some of the programmes where we have sought to make significant economies. One major programme that will provide savings is education, where the reductions are assisted by the expected fall in school numbers. There will be 800,000 fewer children in schools in 1983–84 than in the coming year, which represents a 9 per cent. reduction in three years. Expenditure on education is planned to fall from £8,500 million to £8,000 million during this period, but, because of the falling numbers, that does not imply any deterioration in educational standards.
    On housing, public expenditure will fall from £4,700 million to £2,800 million over the years of the survey period. The Government attach great importance to housing, but housing conditions have improved greatly over the past 30 years and there is now a much better balance between dwellings and households. Our housing standards compare well with those of our more successful industrial competitors. In housing, more than in most other public services, we can look to the private sector to meet people's demands.
    Over the past 30 years, home ownership has grown from 31 per cent. to 55 per cent. of households, and our measures will further encourage that. We are also taking measures to help the private rented sector and to encourage home owners and tenants to let or sublet spare accommodation in their homes. Therefore, there is no longer the need for a public sector house building programme of the size of the early 1970s. Indeed, under the previous Government, housing authorities already recognised that, and

    1701
    between 1976 and 1979 the level of new house building approvals in the public sector dropped.
    While housing capital expenditure under the previous Government halved in real terms, expenditure on rent subsidies increased by about one-fifth, again in real terms. By the time the previous Government left office, council rents were a lower proportion of earnings than at any time for at least 20 years. That is why, over a period of years, a further reduction in the level of housing subsidies is both justifiable as well as necessary. These proposals make an important contribution towards two objectives—the achievement of the expenditure savings which we need and the move towards a housing market which is less constrained by political intervention and is more responsive to people's needs.
    In the Department of Industry's programme, too, we are greatly reducing the extent of State intervention. Expenditure will be halved over the survey period—falling from just over £1,000 million to about £500 million in 1983–84. We intend to restrict industrial and regional assistance, and to concentrate it on those parts of the country with the most intractable problems of unemployment. We shall not be putting the taxpayers' money into the promoting of public ownership, and we have made substantial reductions in the provisions for expenditure by the National Enterprise Board.
    We have also looked to the employment and training programme for a contribution towards the reductions that we require. We shall continue to support cost-effective measures, particularly those which help groups, such as the young people, which are hardest hit by unemployment. For example, we have provided for expansion of the youth opportunities programme from 210,000 entrants this financial year to between 250,000 and 260,000 in the next. But we must hold expenditure to a level which we can afford, and that involves reversing the trend of recent years which has seen the programme more than doubled in size since 1974.
    We have dropped the previous Government's plans for an expensive new short-time working scheme. We plan over the next four years to reduce the total
    1702
    expenditure on the programme by 20 per cent.
    Those comments on some of the individual parts of the total programme are only one part of the consideration of the White Paper. There is the whole question of the totality of that expenditure. I am the first to admit to my hon. Friends that this is not a White Paper which is redolent with high drama in regard to reductions in public expenditure.
    Mr. Healey: Cruelty.
    Mr. Biffen: I should like to compare this Government's aspirations with the performance delivered by the right hon. Gentleman. We have in prospect a projected rise of 4 per cent. in total public spending in real terms over the survey period from 1980–81 to 1983–84. [Hon. MEMBERS: "A reduction."] I am sorry a reduction. Let there be no misunderstanding on that point.
    Some of my hon. Friends who are more charitably disposed to the right hon. Member for Leeds, East than I am may ask me to consider his achievement in 1977–78 over 1976–77, when he achieved a 6 per cent. drop. Indeed, there was a drop of 35 per cent. in the combined programmes of industry, energy, trade and employment, a drop of 14 per cent. in roads and transport and a drop of 11 per cent. in housing. Thus the right hon. Gentleman is a prize candidate for the Hayek award for the quick dash to freedom.
    However, before I place the laurels around him, I must add that the following year he increased public spending by more than 5½ per cent. Therefore, one was practically back to where one was before dislocations of the sudden and dramatic drop of the proceeding year. That is the roller coaster approach to public expenditure. It may have its drama, and it may get its headlines—[HON. MEMBERS: "It has style."] That may be, but we are hoping for a more consistent and stable approach in the remorseless winding down of the levels of public spending.
    There will be no quick dash for freedom with regard to this subject. That is because I do not believe that inflation can be killed by a cavalry charge. Even if I thought that, there are no Prince

    1703
    Ruperts on this Treasury Bench.—[ Interruption.] If that was a delayed action joke, I hope that punk monetarism will be interred for all time. We might call it a draw.
    At the heart of my right hon. and learned Friend's programme is a very clear message, which is the necessity for this Parliament to live with and through the time cycle which is essential for the success of a sound monetary policy. The Chancellor is courageous in making that appeal, because time is the commodity most grudgingly conceded in politics. Yet I am absolutely certain that he has widespread support, both inside the House and outside, for the enterprise on which we are now engaged, and I believe that there is a deep anxiety that we persist to the end.
    Obviously, there have been criticisms of this policy, as one would expect, and the House of Commons is the appropriate forum for debate and criticism. I should like to say a few words about the criticisms that have been expressed by some of my hon. Friends, and then I should like to comment on the speech of the right hon. Member for Leeds, East.
    My hon. Friend the Member for Aldershot (Mr. Critchley) has, in the most elegant fashion, put his own misgivings about the policy. I think that I fairly represent him when I say that he believes that it lacks an incomes policy. Indeed, he said:
    "We need a permanent economic machine or machinery to try to determine what incomes should be".—[ Official Report, 28 February 1980; Vol. 979, c. 1657.]
    That was a point which was reinforced by my hon. Friend the Member for Loughborough (Mr. Dorrell) in an interesting article in The Observer last weekend.
    Although one may set out hoping that this time round incomes policies can do the trick, I must point out that we are not without experience at trying that road. We ace foolish to suppose that it can be limited to incomes and not extended to prices. That which sets out with good intentions by exhortation all too often ends with the necessities of law and an industrial impasse. What may have commenced as a summer's picnic all too often ends as a Passchendaele. We are not immediately attracted to that auxiliary to our main policy.
    Mr. David Steel: In considering the history of all the previous incomes policies of recent years, is it not true that all Governments have introduced one against their wills, against their pre-election pledges and as a panic economic measure? Surely that is different from the argument put forward by some Conservative Members and others. They say that long-term incomes policy should be thought out ahead as a positive part of economic planning.
    Mr. Biffen: No matter how much thought precedes the action, it is its enforceability that has always put the policy to its test.
    Mr. Eggar: Before leaving that point, would my right hon. Friend comment on the idea that something could be learned from Germany's concerted action programme? Does he not agree that that might be relevant to Britain?
    Mr. Biffen: That programme bears no comparison with anything that can be described as an incomes policy for the purposes of this debate.
    Mr. loan Evans: The right hon. Gentleman said that the Government did not have an incomes policy. The steel strike has gone on for three months. The Secretary of State for Industry said that there are certain cash limits. He has said that he will not intervene. Surely those cash limits provide the most direct form of intervention. The dispute has cost hundreds and millions of pounds to the Exchequer and has caused losses to the Coal Board, the CEGB, the Gas Corporation, British Rail and a host of other industries. Certain parts of the private sector have also had to close down.
    Mr, Biffen: That is nonsense. My right hon. Friend has pointed out that he will not underwrite any pay settlement other than that specified in the Government's cash limits. He has not sought to tell management what wages should be paid.
    The right hon. Member for Leeds, East is clearly moving with great delicacy. He is disengaging himself from his previous stance. I was particularly interested in a speech that he made in Cardiff on 20 March. He said:
    "The economic policy of a Labour Government in Britain must, therefore, rest on three

    1705
    pillars—demand management, monetary control, and incomes policy. It is precisely this combination of policies which has produced the most successful economies and the most successful Socialist parties in Europe—those of Germany and Austria."
    That is fascinating. I hope that the hon. Member for Liverpool, Walton (Mr. Heffer) has followed that policy development. It represents a great campaign to convert the Labour Party to some form of Nordic social democracy. Some of my hon. Friends might welcome such an evolution in our political scene. I suspect that if we thumb through the voting records in Strasbourg we shall not find that the Social Democrats of the Federal German Republic and the representatives of the Labour Party were in the same lobby too often.
    I have yet graver doubts. The right hon. Member for Stepney and Poplar (Mr. Shore) has now left the Front Bench. I should have thought that he had shown sufficiently heroic insular virtues as to be not yet in a suitable state of grace for his lederhosen. The thrust of the policy rests on the idea of an incomes policy. As regards concerted action, I do not believe that that is the incomes policy in prospect for the United Kingdom. We know the existing reality.
    Mr. Healey: Is the right hon. Gentleman aware that his right hon. and learned Friend the Chancellor supported that idea when the Conservative Party was in opposition? That is shown in "The Way Ahead" or perhaps "The Right Approach". The right hon. Gentleman should not be so nasty to his boss. He may find that he has not got a job.
    Mr. Biffen: In being good-natured towards the right hon. Gentleman I did not imply any hostility towards my colleagues. Concerted action involves consultation. Any meeting with trade union leaders and others in a wider context forms part of the Government's communication process. If it is recognised as that, its limited value will be recognised. It is valuable, but that value is limited.
    We return to the reality of that closer relationship with the trade unions. The TUC kindly provided evidence' in the form of submissions to my right hon. and learned Friend the Chancellor. It wanted a boost in public spending for retirement pensions of £7,500 million. That was
    1706
    just one of several items, There is no basis, on current evidence, for a counter-inflationary contract between the trade unions and the Labour Party.
    The right hon. Gentleman has sought to appear as a reconstructed Keynesian, going for a less-restricted view on the PSBR as a result of the high savings ratio. He said that my right hon. and learned Friend has ignored that. He said that he had committed "the biggest Budget error". I ask the House to treat the right hon. Gentleman's enthusiasm with the utmost caution. Where is the higher savings ratio held? Are those holding it likely to convert to the purchase of Government stock? Does not the right hon. Gentleman realise that the evidence suggests that these are some of the most volatile statistics? They are very much influenced by levels of pay settlements, tax receipts and so on. As it comes from the Central Statistics Office, it is a residual statistic and the result of subtracting one set of figures from another. If he had done his homework, the right hon. Gentleman would have discovered that the original estimates have often been revised to up to a fifth of their value. Therefore, the right hon. Gentleman's hand represents the most busted flush that we have ever seen.
    Mr. Healey: If the right hon. Gentleman takes that view, how can he base the whole of the Budget strategy on the PSBR? That is the biggest residual in the whole of his statistics. It is the difference between the whole flow of Government borrowing, spending and revenue. It is liable to an error of 5·6 per cent. in the GDP. In my first year the Treasury was £4 billion out on a PSBR of £3½ billion.
    Mr. Biffen: The right hon. Gentleman met with very bad fortune when he was in the Treasury. That is the way things worked out. He has only to look in the Red Book to see how the PSBR has been vindicated, out-turn against forecast.
    Mr. Healey: With respect, in this Red Book the PSBR turned out to be £1 billion higher than the Government had thought. That is concealed in the Red Book. There is no allowance for the fiscal change that was made by bringing forward petroleum revenue tax in order to save £500 million last November. The

    1707
    error in last year's PSBR was £1 billion on a forecast of under £5 billion.
    Mr. Biffen: This is a good-natured debate. The right hon. Gentleman knows perfectly well that difficuties arose about the mailing of VAT as a result of the Post Office dispute. Those difficulties were anticipated. A revised figure was therefore established. If the right hon. Gentleman wishes to engage in such self-mortification, there is nothing that I can do to stop him. Under his stewardship the figures were lamentable compared with those of this Government.
    I commend my right hon. and learned Friend's Budget to the House. It seeks, above all, to secure the necessary time for the success of our central policy. There are certain areas where one can already see changes that will be to our advantage. The Budget will encourage the small business sector of the economy. [Interruption.] The laughter of the hon. Member for Sheffield, Heeley (Mr. Hooley) merely indicates that many Labour Members would not recognise a small business man if they fell over one.
    Already we are seeing evidence that monetary expansion has stabilised. Sterling M3 rose by just over 14 per cent. in the first four months after the June Budget. In the succeeding months that rate of increase fell to 10 per cent. Although pay settlements are still at rates that cause a good deal of concern, they should be seen in the light of the CBI data bank report that 52 per cent. of pay deals—and that figure covers numbers of people as well as of deals—since last August have involved settlements of less than 15 per cent.
    Our policy is designed to reduce inflation and interest rates and to seek a stable currency. That is an essential precondition for a Tory social policy based on the concept of nation and family and the application of relevant welfare benefits through a partnership of voluntary and State agencies. It is a prerequisite for a Tory industrial policy based on free enterprise and rewarding success in an economy reflecting the consequences of North Sea oil and gas.
    Ten months ago a mandate was secured for the policies that my right hon. and learned Friend the Chancellor of the Exchequer is pursuing. They are policies designed for the span of a full Parlia-
    1708
    ment. Time will be their judge and vindication. This Budget consolidates such polices, which will reduce inflation though the passage of time. [Interruption]. I say to those hon. Gentlemen who express hilarity that the nation will be more consolidated and socially cohesive behind policies that seek greater realism than the spurious compassion drummed up on the Labour Benches this afternoon.
    The policies can succeed and the Treasury Bench is determined to attend that success.
    5.52 pm
    Mr. Richard Wainwright: Hon. Members from various parts of the House, and certainly from the Liberal Benches, have long urged that the House should debate public expenditure together with the Budget Statement. We hope that what has happened by coincidence this year will become a deliberate part of our procedures. The reason is obvious, and long ago penetrated virtually every other organisation in the Kingdom. It is common sense to debate spending and receipts—benefits and costs—at the same time.
    Neither the Chancellor of the Exchequer nor the Chief Secretary to the Treasury has followed the spirit of that coincidence. In pressing on the House their unique version of their dogma they have not treated us to a coherent explanation of the hardships and costs, especially the social costs, of the option that they have taken. They have not had the wisdom to explain to the House the combinations of varying types of fiscal and monetary policy open to them.
    That has resulted not only in confusion and a somewhat sour atmosphere in the House, even amongst Government supporters. What is much worse, the country is bewildered. We are being led into years of austerity without receiving a proper explanation of what it is for, where it is leading and how we shall get out of the tunnel. It is a recipe for disaster. I prophesy that a U-turn will be forced on the Government when unemployment reaches intolerable levels, partly because the country has not been given coherent leadership or an explanation of where it is being, taken.
    Those omissions are particularly relevant to industry. Through some sleight of hand the Government have captured

    1709
    the top brass of the CBI, and they appear to feel entitled to ignore the ordinary run of manufacturers and medium-sized business. In the modern age those businesses have considerable overheads, and staff to whom they have a strong responsibility. They are in a state of desperation as a result of the lack of tangible relief in the Budget.
    At the centre of the problem is the size of the public sector borrowing requirement target. We know that it is only a target, because the figure is exposed to the changes and chances of the ensuing 12 months. We have received no coherent explanation why the Government have settled on their highly restrictive and damaging target. The only sustained argument for this in the Budget Statement was an airy reference to other developed countries. We were told that tightening belts was a universal phenomenon.
    That is an inaccurate comparison and carries the matter too far. Throughout the industrial world there is a calling-in of expansion, a feeling of need for care and fiscal caution. However, the annual rate of growth in OECD countries as a whole is still projected as at least 2 per cent. per annum. Our forecast for the United Kingdom is for minus 1 per cent. I reject entirely the idea that the Budget is simply following carefully and meticulously the example of other more successful countries.
    I wish, in some ways, that that were so. I wish that the Government would introduce a cheap loan system for industry, such as that which has successfully sustained Japanese industry for many years. We hear nothing of that.
    The Liberal Party believes that the public sector borrowing requirement is much too low. At this stage of the economic cycle it should be increased by at least £2 billion. I shall briefly indicate a few proposals for this in order to try to be constructive.
    I come straight away to the worst piece of sabotage in the Budget—the destruction of the lower rate band of income tax. The precursor to that, amongst all the leaks of this Budget, was an inspired campaign by the Government, for which the media fell because of its ignorance of income tax matters, to represent the lower rate as a silly nuisance that caused administrative trouble and was best done
    1710
    away with as quickly as possible. That is emphatically not the truth of the matter.
    The Government are keen on examples from other countries, so let me remind them that no other major industrial country has an initial rate of tax for the first slice of taxable income approaching anywhere near 30 per cent. On the most recently ascertained figures, the initial rate at which people pay income tax in France is 5 per cent., in Italy and Japan 10 per cent., in the United States 14 per cent., in the Netherlands 20 per cent. and in West Germany 22 per cent. By an act of sabotage the Government have put up our initial rate—the first impact of tax on extremely low, virtually poverty, earnings—to 30 per cent. Anyone with an instinct for revenue matters knows without argument and reference to statistics that that is utterly misplaced in principle.
    The object of a civilised tax system should be a smooth take-up of the tax burden so that the full rate of tax is not felt until the taxpayer is enjoying a reasonably substantial income, well above the poverty line. What the Government have done will have a cruel, not simply an unfair, effect upon a large number of people who seem to be ignored by Treasury Ministers—those who, in spite of the strong financial temptation to leave work and live on benefits, continue to earn their poverty by working for low pay. Those people had at least some small solace in the reduced rate of income tax on their modest earnings. They will now incur the full 30 per cent. rate. That will also lead to substantial pay claims.
    The most sinister argument for that move is that it will save 1,300 Inland Revenue staff—as if that were a decisive point. It will not have escaped the notice of hon. Members that in the same speech yesterday the Chancellor made provision for an extra 1,500 staff to deal with the admirable object of taxing unemployment benefits.
    It is intolerable that we should settle our taxation policies according to the number of Inland Revenue clerks that are needed to carry them out. That should be the last rather than a primary consideration. The lower rate of tax, far from being abolished, should have been reduced to a rate of 20p in the£, and we shall try to amend the Finance Bill in that respect. If that had been done, about

    1711
    £1·8 billion would have been injected into the economy, which would have been of great value to industry.
    Mr. Hooley: Another consequence of bringing people straight on to the standard rate of tax is that it makes it more difficult to give tax remission to people in the lower income tax bands without automatically giving disproportionate help to those at the top.
    Mr. Wainwright: I share those sentiments.
    I deal next with capital taxation. The Chancellor's feeble stance must have been a disappointment to hon. Members of all parties, but no doubt for varying reasons. I regard the state of capital taxes as deplorable. In common with most hon. Members, I used to deride the old death duties, because in many ways they had become voluntary taxes and were not having any marked redistributive effect. However, in spite of the Labour Government's strong statements that they were effecting an irreversible redistribution of wealth—
    Mr. Heffer: That was only our party programme, not the Government's.
    Mr. Wainwright: The former Chancellor of the Exchequer, the right hon. Member for Leeds, East (Mr. Healey), when he introduced capital transfer tax, said that it was a determined attack on the maldistribution of wealth in Britain. He said that in his Budget Statement in March 1974.
    In 1972, the poor old tattered death duties, such as they were, raised revenue of£482 million—0·87 per cent. of GDP in that year. In the fiscal year 1979–80, all the new capital taxes raised only £430 million, and that was only a miserable 0·26 per cent. of GDP. The Labour Goverment's effort to effect an irreversible shift in wealth has failed, and the present Chancellor is simply tinkering with the duties, which will reduce the yield still further, so that it will become probably no more than 0·21 per cent. of GDP.
    To Liberal Members that is a hopeless failure of a necessary measure for redistributing wealth. We shall call for an accessions tax, not by taxing the donor but by taxing the recipients of gifts according to the recipients' means at the time that they receive them. We heartily oppose the Budget measures to reduce the small re-distributive effects of capital tax.
    1712
    On the positive side, there are the share ownership encouragements. With some parental affection I welcome the improvements in tax reliefs for employee share ownership. However, according to the Inland Revenue's press statement, those wider concessions come into effect on 6 April 1980. That being so, there are many schemes which, because of their dates of foundation, will issue shares and take advantage of concessions from that date. However, there is no Budget resolution to that effect, and I know from my experience that the head office or some inspectors of taxes will note that there is no parliamentary approval to operate those concessions from 6 April. I hope that the Chief Secretary will be able to say that we shall not have to wait for the Royal Assent to the Finance Bill for shares to be issued on the new terms that were wisely included in the Budget.
    There is also a disappointment. Any hon. Member who has addressed audiences on the valuable subject of wider share ownership will be fully accustomed to the genuine people at the meetings who ask what tax concessions will be granted for people who do not work in profit-making industries or who do not work in industry at all. Why are those privileges to be limited to those who work in the profit-making private sector? With that in mind, we have been trying to draw the Government's attention to the brilliant success so far of the loi Monory in France, which has stimulated investment in industry. It has started well and it allows tax payers buying new shares in French industry to deduct approximately£500 in any one year from taxable income. I hope that the Government have not entirely abandoned that possibility. I am not making a partisan point on this.
    The House will debate the social security sections of the Budget on Monday. They are of immense importance. I shall not trespass in detail on that subject today, in the hope that another Liberal Member may succeed in catching your eye, Mr. Deputy Speaker.
    However, I refer briefly to the betrayal on child benefit by a party that is widely advertised as the party of the family. The Government are increasing child benefit by only 75p. with effect from November, by which time inflation will be raging ahead even faster than at present. This is a scandal. It should be increased by at least £1.20 if it is not to come into effect

    1713
    until November. Other hon. Members who are more eloquent than I am will introduce the humanitarian considerations and the considerations of fairness and justice. I simply wish to put the hard-nosed point of the good of the economy.
    In his Budget Statement the Chancellor said:
    "One of the biggest problems is the lack of balance between social security benefits and incomes in work."—[Official Report, 26 March 1980; Vol. 981, c. 1459.]
    The child benefit scheme is almost uniquely and admirably designed to answer part of that problem. It is untaxed and it is paid in full to those at work, but it is taken into account before social security payments are made. Almost uniquely, child benefit does not contribute to the poverty trap. Certainly during the proceedings on the Finance Bill we shall press as hard as possible for an increase of £1.20 in November.
    In conclusion, the case for relying solely upon strict control of the money supply, without regard to the harm that that does to British industry and our social fabric, has not been made out. In particular, we have never had an answer to the key problem of how the Government propose to get out of the strict control.
    We hear a lot of airy-fairy phrases about several years of hardship and difficulty which will lay the foundations for a return to economic growth. The Government never tell us how that can be contrived on their policies without starting the inflationary cycle all over again. It would be a great contribution to the wisdom of nations if, during these debates, the Government could explain how they hope to get back to a path of expansion and proper economic growth on their present policies without reviving inflation.
    The Budget has done nothing whatever to stem the tide of cost pressures which continues to push up prices, put us out of export markets and ruin whole sections of British industry. The Budget has done virtually nothing to help the business sector, and it has increased income tax in real terms by the stupid abolition of the lower rate band. In our view, a more expansionary policy will become increasingly necessary as unemployment mounts to intolerable heights,
    1714
    and that will have to be accompanied by a pay policy. Perhaps this Budget is the Government's last desperate attempt to avoid a U-turn of that kind.
    6.12 pm
    Mr. Peter Hordern: I congratulate my right hon. Friend the Chief Secretary to the Treasury on his speech this afternoon. I am glad that he opened from the Treasury Bench—he made a speech of great clarity and lucidity, which we have come to expect from him. His speech was in marked contrast to the turgid contribution of the right hon. Member for Leeds, East (Mr. Healey).
    The trouble with the right hon. Member is that he lacks credibility. It is as if Horatio Bottomley were pretending to be the chief cashier of the Bank of England. Some of his remarks were proof of this. He spoke of the contribution of£1,000 million to the European Economic Community which is mentioned in the public expenditure White Paper. He chided the Government for not altering that figure and for not taking account of some reduction in it over the years ahead. That was typical of his approach to public expenditure White Papers. He always put a gloss on future events. When he was in charge of our economic affairs he always told us that growth would proceed at 3 or 4 per cent. a year and therefore we could well afford even larger increases in public expenditure, which subsequently obtained.
    I think that the public expenditure White Paper on this occasion is an example of clarity and proper responsibility. It shows financial caution and rectitude, and as such I commend it. However, there are other parts of the public expenditure White Paper which I should like to comment upon now, particularly the attitude displayed towards public expenditure itself.
    There are considerable divisions of opinion about the relative value of public expenditure. There are some Labour Members who feel that public expenditure should never be cut in any circumstances. They are the ones with snow on their boots. There are others, on both sides of the House, who feel that public expenditure should be cut in principle, but in practice it is always some other neck of the woods that should suffer the cuts and not their favourite area.

    1715
    Then there are those—and I am one—who believe that public expenditure should be cut in relation to what the nation can afford. We might be called the heavy cutters.
    My right hon. Friend the Secretary of State for Industry is also in that category. A short time ago he said that the Government had lost the first six months. I agree with that view—in fact, I think that we have lost the first year in public expenditure and that we should have cut it faster much earlier.
    Then there is the other category, which includes the right hon. Member for Leeds, East. Those people believe in a contortionist attitude. They believe in following either Keynes or Friedman, depending on which way the wind is blowing at the time. It is very difficult to find out the right hon. Gentleman's present attitude to monetarism, public expenditure or any other aspect of our economic affairs.
    I wish to draw attention to the still considerable increase in the rate of money supply. A rate of some 10 to 11 per cent. is predicted for this year. One should compare that rate of increase with the rate of increase of money supply in other countries. In the United States, on the same measurement, it is 6 to 9 per cent. In West Germany it is from 5 to 8 per cent.
    I draw these comparisons because the removal of exchange controls—of which I am wholly in favour—means that those institutions with capital can invest their money in any country they wish. Countries in which the rate of increase in the money supply is slower will become more attractive if their interest rates are favourable. Institutions will prefer to invest in those countries to supporting Government stocks. Therefore, it is not necessarily the case that the funding will proceed easily. Considerable funds may go abroad—in fact that is already happening.
    I believe that not only the higher rate of money supply continue—and it is too high in my judgment—but that interest rates will remain high, not just this year, but probably next year as well. This will be necessary to attract money into the gilt-edged market. Therefore, I should have preferred a more considerable reduction in public expenditure. I know that that leaves me open to the immediate question "How would
    1716
    you cut it?". I should have imposed higher charges on tobacco, wines and spirits.
    If this rate of a 9 to 11 per cent. increase in the rate of the money supply is to obtain, it will be difficult to attract funds to the gilt-edged market. Therefore, interest rates will remain high, and this will mean continuing, considerable difficulty for industry, not just this year, but next year as well.
    At present, industry is in a very low condition. The right hon. Member for Leeds, East has been weeping crocodile tears for industry. We must not forget that he wanted to increase employers' contributions to national insurance, so his tears now leave me quite cold. But there is no doubt that industry is in a somewhat parlous condition. One has only to look at the results from com-panics. A week ago we heard that Stone Plan was making heavy losses—and that is a large exporting company; G. and J. Weir, which is also a major company in the North, made a very heavy loss; and Tube Investments is now considering its investment programme, not in this country, but in the United States. There is no doubt that investment conditions are not very attractive in this country at present. Substantial changes need to be made, particularly in the rate of interest, to make it much more attractive.
    We must deal with the fact that the money supply is expected to remain high and that public expenditure is also too high. I do not believe, however, that that is the real basis or the nature of our problem. Our difficulties have gone on for much longer than that. At the heart of the matter is the de-industrialisation of our country. There has been a continuing movement and trend for many years from the private wealth-creating sector into the public sector. Between 1961 and 1978, 1·5 million people moved into the public sector. There was a 60 per cent. increase in the number employed by local government, and a 30 per cent. Increase in the number employed by the Civil Service in those years.
    Although in other countries there has been considerable movement from productive to service industries, there has been no comparable increase in the public sector. I do not believe that a similar comparison can be drawn with any other

    1717
    country. For example, in 1965 our education service employed just under 400,000 people, some of them part-time, who neither lectured nor taught. At the end of 1979 there were not 400,000 in that capacity but 717,000, again many of them part time, who neither lectured nor taught.
    In the National Health Service the number employed in 1961 was 575,000. The latest figures show that 1·175 million people are employed there. With the best will in the world, taking into consideration the fact that the number of beds in the NHS is considerably smaller than in 1961, we have not achieved the improvement in standards that we might reasonably have expected because of the considerable increase in the number of employees.
    What is to be done? I know that cash limits are bound to have some effect, but I fear that they will have the effect of reducing services and not the number of personnel employed. The Government should take further action about the considerable increase in the number of administrators in the education and health services.
    Other countries have different systems. The United States has a general accounting office. If we are not to have a similar body, which I should like to see, I believe that the Monopolies and Mergers Commission should be asked to make a proper investigation of the NHS and our education services, especially into their staffing ratios. I cannot believe that it can properly be claimed that we have had the improvement in services in either of those organisations that could reasonably have been expected when one considers the increase in the number of administrators.
    The terms of service in the public sector are now very attractive compared with the private sector, not only with regard to comparability of wages and salaries, but also with regard to indexed-linked pensions. One thing that I was glad to hear in the Budget Statement yesterday was the announcement of a new inquiry into index-linking of public-sector pensions. I do not know what this inquiry will show, but, on any proper comparison, I would have thought that there should be a larger contribution than at present to justify the real protection that an index-linked pension gives. While this inquiry proceeds, I hope that my right
    1718
    hon. and learned Friend the Chancellor of the Exchequer will arrange for a proper examination of whether we need funded schemes in the public sector at all.
    My right hon. and learned Friend knows my views about this, and I have bored the House with them already; but the Government Actuary has shown, quite convincingly, that we would be able to achieve a reduction of £2,000 million a year if we paid pensions in the nationalised industries and local authorities as they arose rather than through funded schemes. That is well worth looking at, and I hope my right hon. and learned Friend will look at it.
    Essentially, our problem is to halt the flow of people into the public service—the wealth-consuming sector—and restore it to the wealth-creating sector. How can that be done? My right hon. and learned Friend yesterday mentioned an examination of corporation tax. He also said that the new exposure draft which the accountants are preparing will be ready soon. I hope it will be, because it will then be possible to have a system through which profits will be taxed in a real sense and tax will be paid only on profits as they are earned, allowing for inflation. That will mean, of course, no stock appreciation relief. But it will also mean that investment will take place based on proper criteria and, further, that it should be possible to reduce the rate of corporation tax.
    I have long felt that the number of people whom we employ in the Department of Industry, the Welsh Development Agency and the Scottish Development Agency is too large. We carry with us the burden of a demand economy while trying to run the economy in a monetary sense. We have this large burden which I believe could be reduced considerably by tax incentives over a much wider area than at present. By that I mean that we should follow a system rather like that in Ireland, where there are tax-free holidays for 10 years for companies. It is a very successful system and attracts foreign firms to that country.
    I know that my right hon. Friend the Secretary of State for Industry feels that a substantial Department for assessing regional aid is necessary. I do not deny that. We cannot do without regional aid altogether. However, I ask my right hon.

    1719
    Friend to consider the impact of having tax-free zones for companies in all the development areas. That would be a much more intelligible system for foreign firms to understand. It is no use our thinking that we can regenerate productive wealth or industry simply by taking money from successful firms carrying it through the Civil Service and giving it very largely to unsuccessful firms. Much the best way is to attract successful firms to those areas where unemployment is high. I believe that that would be a more successful policy than the one followed at present.
    I am greatly interested in the experiment that is about to take place in the new enterprise zone, but if there is to be a reduction to a bare minimum of Government requests for statistical information, why cannot that be applied universally? If it is not strictly necessary to have statistical information in city centres, I cannot see why it should not be applied throughout the whole country. I hope that my right hon Friend will consider that also.
    I deal next with the proposals for wider share ownership. I congratulate my right hon. and learned Friend the Chancellor of the Exchequer and his colleagues on these proposals. They are certainly an improvement on the proposals which now stand enacted and are almost as good as the proposals which we originally put forward when in opposition. However, I should have liked them to be more generous. I follow what the hon. Member for Colne Valley (Mr. Wainwright) said about the desirability of a system that would attract funds generally, such as the loi Monory in France, but the fact is that we have tried to run our economy in a Victorian financial straightjacket for much too long.
    Mr. Nick Budgen. I fear that we are not in one now.
    Mr. Hordern: The Victorian economy had this advantage: in that system there was a certain paternalism. Those who owned factories took a good deal of personal interest in their employees. The same cannot be said today. Many who work in companies today have not the slightest interest in the profitability of
    1720
    the firm. Similarly, those who are shareholders are concerned only with the size of their dividend cheques at the end of the year. Furthermore, shareholders can, if they wish, vote with their feet by selling their shares and getting out. When we compare this archaic system with what is a lifetime guarantee of employment in Japan, and the substantially more generous schemes for wider share ownership in Western Germany, we realise that we need to take a different view about the importance of workers owning shares in the company for which they work.
    Mr. Alan Clark: I am a little anxious about the reference by my hon. Friend to the benevolent Victorian factory owner. It evokes the shades of Manchester liberalism that waft over the party from time to time—greatly to my regret. I am sure that if my hon. Friend were to read the social history of the period he would recognise not only that the good employers were few in number but that the Tory Party at that time protected, and relied on the support of, the working class, and the Liberal Party was the party of the exploiters and mill owners.
    Mr. Hordern: I do not disagree with my hon. Friend, but my proposals are designed to ensure that workers in factories will support the Tory Party much more than they have done hitherto, and will do so as they did in Victorian times. I believe that they will. I see no reason why workers should not own far more of the shares of the companies in which they work. If they had greater ownership, they would have a real interest in the prospects and future of their firms, or much more than at present, which is little more than the size of their pay packets at the end of the month or week. That is an issue to which we must pay a great deal of attention.
    I commend the scheme that my right hon. and learned Friend the Chancellor of the Exchequer announced yesterday, which goes a little way towards the proposals that I have set out. I wish that the Government would go further. However, apart from public expenditure, which I believe should have been reduced even further last year and again this year, I congratulate my right hon. and learned Friend on the Budget that he has introduced.
    6.31 pm
    Mr. Eric S. Heller: I begin by referring to the speech of the Chief Secretary to the Treasury. The delivery of his speech was much better and clearer than that of the Chancellor of the Exchequer yesterday. However, I found the content of the speech equally disappointing.
    Mr. Hooley: Are you relieved, John?
    Mr. Heffer: I have no doubt that the Chief Secretary is relieved on that basis.
    I agree with the right hon. Gentleman's comment that mindless consensus is the enemy of clear-sighted government. I could not agree with him more. We have had consensus politics and economic policy for quite a long time. It has not worked. It has worked only in the sense that if there had not been Government intervention in economic matters, the problems would undoubtedly have been greater. The important matter is that that type of consensus politics has not fundamentally solved the problems with which Britain is faced. We must learn that lesson. To that extent I agree with the hon. Member for Horsham and Crawley (Mr. Hordern). However, the conclusions that I draw are fundamentally different from and opposite to those drawn by the hon. Gentleman.
    I could be classified by the hon. Gentleman as one of those with snow on their boots. That is because I have never been in favour of massive public expenditure cuts. I am in favour of some public expenditure cuts, but probably not those of which the hon. Gentleman would approve. It would be wrong to say that I never agree with public expenditure cuts. Much depends on what is being cut and the objective of the cuts.
    When the previous Labour Government were cutting back on public expenditure, I and a group of my colleagues made it clear that we opposed our own Government. When we believe passionately in something, we should be prepared, if not to vote against our Government—we often find that extremely difficult—to make our position clear by not supporting them. Many of my hon. Friends did that consistently when the previous Labour Government were cutting public expenditure. We have been consistent in our
    1722
    attitude to public expenditure. If that means that we have snow on our boots, so be it. I do not know whether that is intended to be a reference to the Soviet Union. The hon. Gentleman knows me sufficiently well not to hint in that direction. If he were doing so, I might get somewhat upset.
    We must consider the Budget against the background of the crisis in which Britain finds itself, and the crisis of the whole Western world. It is true that the Western world is in a crisis. We often hear how marvellous it is in Western Germany or Sweden vis-a-vis the situation in Britain. We hear that every country in the world is solving its problems save Britain.
    We are part of the crisis in which the whole of the Western capitalist world finds itself. Our part of it is slightly worse because, within the overall crisis, we have certain peculiarities, to which the hon. Gentleman referred when he talked about deindustrialisation and because of our failure to regenerate our industry when we should have been doing so. However, even the countries that have regenerated their industries and built up new economies—they have been Johnnies-come-lately and have had the advantage of starting from our level in terms of modem technology—are faced with the serious crisis that faces Britain.
    If that analysis is accepted, there are two basic but different ways of dealing with the crisis. There is the approach, which, unfortunately, the Government have taken, of placing the full burden of the crisis on the shoulders of ordinary working people. The second method is to ensure that the crisis is dealt with on the basis of equality throughout the community. I am not denying that the Government are considering the crisis in strictly capitalist terms and that an effort is being made to solve it. However, that effort is being made at the expense of ordinary working people, who will suffer as a result of the way in which the Government are tackling the problem. That is the essence of the basic divide and argument between the two main parties.
    How is the crisis being solved by the Government? It is being solved by massive public expenditure cuts.
    Mr. Alan Clark: They are not massive.
    Mr. Heffer: Yes, massive public expenditure cuts which are bound to lead to higher levels of unemployment. There are now about 1½ million unemployed. By the beginning of next year unemployment is likely to be over 2 million. It will possibly increase much further. In the absence of a new approach and bearing in mind new technology, we may never be able to solve the problem of unemployment without the interventionist policies for which I argue.
    The result of the Budget will be higher prices by direct Government policy. There is no question about that. Even the Government admit that by the end of the year inflation will increase by 2 per cent. and there will be higher prices for ordinary people. The public expenditure cuts will lead to massive unemployment.
    It has been said from the Opposition Front Bench that there is real anger on this score. Yes, I am angry. I shall tell the House why I am angry. I am close to ordinary working people. When I go home at the weekend I go to my mother-in-law's house on a council estate. I meet my pals with whom I used to work on building sites, some of whom have been out of work for a year or 18 months. I meet my former comrades from the shipyards. I have a pint in the Labour clubs. I am angry at the Government's proposals, which will not. increase unemployment benefits by 5 per cent. in relation to price increases. That will mean a real cut in the standard of living of ordinary working people. Many people who have been out of work over a period will suffer as a result of Government policy.
    The Government have adopted a callous and heartless attitude. I think of the prescription charges and the other measures taken as a whole. They are a direct attack on the living standards of ordinary working people. My right hon. Friend the Member for Leeds, East (Mr. Healey) was right to draw attention to what was said on the radio this morning. I heard one person say that he had gone across to New York and had had a couple of pink gins while travelling on Concorde. He said that he had had a marvellous time, that the Budget did not mean anything to him and that it was the right kind of Budget. A working woman was asked what the Budget meant
    1724
    to her. That is the real issue of the Budget. That is what we are talking about.
    I now come to the position of the trade unions and the deeming policy. One hon. Gentleman said that he did not know what was meant by deeming. I do not care whether we call it deeming or knocking £12 off benefits. They are still benefits. It comes to this, that trade unionists' wives and families will be treated worse than criminals. It is not a criminal offence to go on strike. The legislation concerned itself with people in real need. Strikers' wives and children will be affected.
    Mr. Budgen rose—
    Mr. Heffer: I shall not give way, if the hon. Gentleman does not mind.
    Single strikers never received anything; nor did strikers receive anything for themselves.
    Mr. Nicholas Winterton: Quite right.
    Mr. Heffer: The hon. Gentleman says "Quite right". Does he know that when working people are on strike they club together to help feed the men who are without any income? They have this solidarity, one with the other. Strikers' wives and children will now suffer as a result of Government action. That puts the burden on to the shoulders of working people.
    Mr. Budgen: I understand the hon. Gentleman's argument about the morality of that. However, on a practical level, is it not likely to cause increased trade union membership? People will join trade unions to ensure that they receive union benefits should they go on strike.
    Mr. Heffer: The hon. Gentleman indicates that he has a total lack of understanding of the trade union movement. Not every strike is official. Many strikes are unofficial. In every unofficial strike, when there is no strike pay, workers' wives and families will suffer. What about the workers who are not members of trade unions and who go on strike from time to time? [Interruption.] I am trying to make a serious point on a matter about which I feel deeply. In the same way, right hon. and hon. Gentlemen feel deeply about their regiments when they talk about the Army. The working class and

    1725
    the trade unions are my regiment. I feel deeply about their problems. I am arguing their case tonight.
    Allied with the Government's attitude is the so-called Employment Act and the extra money to be spent on law and order. Does that mean that the Government expect confrontation on a massive scale with the trade unions, so that the problem may be dealt with either through the method of no assistance to wives and families or by building up law and order enforcement to deal with those workers? That could possibly be the pattern of thinking of Government supporters. However, the pattern is not realistic to the Opposition.
    Finally, I come to the proposal for the enterprise zones. My right hon. Friend referred to them as combat zones. I prefer to suggest that the Government have mini Hong Kongs in mind. Perhaps some Government supporters have not watched the Milton Friedman programmes. I watched them. Milton Friedman walked round Hong Kong and said "Marvellous: absolutely wonderful. They can work all the hours they like. There are no trade unions to protect them: there are no safety, health and welfare regulations". The hon. Member for Horsham and Crawley gave the game away. He said that that was a good idea. He said "We do not want planning arrangements or controls". He asked why the Government did not apply the system to the whole country. That is why I oppose the idea. Once the system is entrenched in a few areas, the demand will grow to apply it throughout the country and get rid of all planning controls. That will result in chaos in the economy. It is not on.
    Mr. Hordern: I confined my approval of the Government's measures to the idea that the statistical information required by the Government would be strictly limited. I said that that part of the Government's proposals might be universally applied. It was not that I thought that planning procedures or health and safety measures would be unnecessary in the rest of the country. The Government should set up additional tax-free zones, which would be more effective.
    Mr. Heffer: If I misunderstood the hon. Gentleman in any degree, I accept that perhaps I was slightly wrong. Never-
    1726
    theless, once these economic zones get under way, the demand for them will grow, which will result in total economic chaos.
    One Government Front Bench speaker said that the Opposition would not know a small business man if they fell over him. I do not know whether he knows the Opposition. My entire family were small business people. My uncle was a fruiterer and florist; another uncle had a butcher's business; another was a confectioner; and another was a small builder. I know about small businesses.
    It is rubbish to suggest that the Opposition have no understanding of the problems of small businesses. For years many members of the Opposition argued in favour of support for small businesses. My right hon. Friend the Member for Bristol, South-East (Mr. Benn) and I put forward a scheme which, unfortunately, did not see the light of day. In it we suggested ways of helping small businesses. Let us get that silly argument out of the way.
    Reference was made to the "spurious compassion" of the Opposition because we are all opposed to the mean and vicious policy which the Government are introducing. Our compassion is not spurious; it is real. It is based on the fact that we come from the people who are now being screwed down by the Government.
    In the long term, the Government will not get away with their policy. They might get away with it for a short period. However, the people, and especially those in the trade union movement, will be furious. My ideas have been deliberately distorted. I said that trade union strikes against Government policies would be interpreted as political strikes. In fact they will be strictly economic disputes, because trade unionists will be defending their living standards and their working conditions. That anger will grow and it will grow to such an extent that in less than two years Conservative Members will be really sorry that they are pursuing a policy such as this. Either they will have to make a U-turn or they will go down in a welter of chaos.
    6.51 pm
    Mr. Alan Clark: I am in agreement with the broad thrust —if I can use a word with such overtones

    1727
    of aggression and confidence about a Budget of which the best that has been said by its defenders on the Front Bench is that it is consolidatory. Any Budget introduced in our second year that leaves Health Service charges or the same proportion of them in percentage terms the same as in 1967 can hardly be thought to be particularly aggresive or even particularly confident.
    The first sentence in the Red Book asserts our policy of
    "reducing inflation and improving the supply side of the economy"
    "supply side" being a very "in" concept at the moment. It means our capacity to make things. If we do not have a capacity to make things, our productivity, which is so vital, cannot increase. No one would quarrel with that sentence but a little later on, on page 20, we get a paragraph dealing with the strategy of the Budget, from which we see that the improvement of the supply side of the economy is to be achieved
    "by removing obstacles and allowing market forces to work."
    Removing obstacles is one thing, but the refusal to erect barriers is something totally different. The fact is that the supply side continues to contract and will continue to contract, in my view and on all the projections of all the figures we have, until it is properly defended against the intrusion into manufacturing of competition from those who are sometimes referred to as our trading partners but whom I prefer to look upon as our economic rivals.
    It is this unrestricted competition—the operation of market forces in an international context rather than in the national context in which industry in the United Kingdom functions and which I know all my hon. Friends support —this unrestricted play and operation of market forces, that still poses the greatest danger to our manufacturing capacity, our productivity, as it exists at the moment. Indeed, there is a danger that the policies of the present Government, excellent and admirable though they are, may, before they have had time to work themselves to fruition, accelerate the damage that is being done to our own manufacturers—that is, to the supply side —by permitting the unrestricted access of foreign manufacturers to our markets.
    1728
    In the Red Book the uncertainties about this are very well illustrated on page 19, below table 9, where there is an all-purpose paragraph disclaiming any responsibility for any of the forecasts. It reads:
    "Events at home or abroad could develop so as to produce a very different situation. World trade could grow faster or more slowly than assumed; the supply response of the United Kingdom economy could be very different, with consequences for productivity and trade performance; oil and other commodity prices could show different movements; and the behaviour of earnings is always difficult to predict."
    It might be thought that that kind of general disclaimer would be enough to get the Treasury off the hook in any of the other forecasts it makes, but further on there is a table that shows a margin of error in the forecasts, and the interesting thing is that the two items showing the largest margin of error are those relating to imports and exports. Speaking from memory, I think that the margin of error predicted for exports is 125 per cent. and the margin of error predicted for imports is 100 per cent. My own feeling is that exports will be in deficit by almost the exact amount—that is, they will fall short of the prediction by almost exactly the amount of the margin of error in the cautionary note—and that imports will exceed the prediction by almost the total amount of the margin of error that is predicted. The effect of this will be a still more devastating contraction of our manufacturing capacity.
    I have wearied the House many times with the arguments for protecting our manufacturers and I certainly would not presume to do so again on this occasion. But I should like to draw the attention of the House to two things. When I first started doing this, those on the Front Benches on both sides of the House dismissed what I said in a very cursory way, simply referring to some of their own figures or predictions and saying that I did not have access to the sort of figures they had, and they knew that it was totally impossible.
    Since that time, I have made a pilgrimage to the very altar of Mithras, as it were, where these rites are carried out and entrails examined. I have laid on the altar various assumptions—or runs, as they are called by those who operate the computer—and the figures that it

    1729
    produced, the answers that the oracle gave, certainly lent great statistical force and weight to what natural common sense would tell anyone who looked at this problem. I have published them in The Times and I have them available in greater detail if any hon. Member is interested enough to seek further enlightenment. But, having already poured some scorn on the Treasury's capacity to make forecasts, which we can assume derive from this very instrument, I do not think that particular weight has to be attached to any special set of figures. All I am saying is that I am now armed with those very weapons which were formerly used to dismiss or deride my arguments about protection.
    The other thing I would say to my right hon. Friend is that I have sometimes been rather roughly treated by him and his hon. Friend in winding-up speeches and my arguments have been brushed aside in a rather perfunctory way. However, the feeling of inevitability, the feeling that this is something we shall have to turn to, is not only getting more widespread among those who devote their minds to economic matters, but is spreading, with sonic apprehension, I believe, to our foreign competitors or, as we are sometimes obliged to call them, our trading partners.
    Only yesterday I was entertained in the American Embassy to a lunch which was attended by high-powered economic advisers and diplomats whose purpose was to get me to say how much support I thought there was for my views and then to try to dissuade me—which they did in turn—from holding them and to demonstrate how ridiculous and unfriendly they were. All I can say, as an ardent nationalist, is that if representatives of other countries do not like a policy and try to talk me out of it, that policy must have something to commend it.
    I want to deal with two of the most familiar, often used but least thought out objections to the protectionist argument. The first is the retaliatory argument. Many people who do not want to devote their minds to this subject but think in terms of received ideas say that protectionism is unthinkable, the United Kingdom depends on world trade and retaliation would do us far greater damage than would be brought about by protecting our domestic industries.
    1730
    The answer to that argument is that the United Kingdom does not depend on world trade. We are in deficit in world trade in manufactures and we are likely to aggravate that condition as the years advance. In the finality of logical argument, if world trade in manufactures were suspended, or the two items in the book were balanced, we would be better off. But there is no question of that happening.
    We have to protect our manufacturing industry by a total, overall and fully conceived strategic operation. Retaliation against us, in so far as it occurs, would be piecemeal, phased and subject, if the Foreign Office is still capable of operating in that way, to diplomatic negotiation. It would not in any sense be universal, because the destination of exports is not the same as the origin of imports. They do not balance or put us in deficit either in volume or financial terms.
    So in the very worst case retaliation is likely to affect only a relatively small proportion of our export trade, whereas protection, particularly on the conservative lines I originally put through the Treasury computer, would have an immediate effect by opening up markets in our domestic environment to manufacturers who at present are being excessively squeezed by the intrusion of foreign imports.
    The second argument that is put forward after the retaliatory argument can be broadly described as the "quality of life" argument. It carries with it certain derogatory assumptions about conditions in British industry. That argument is that there will be bottlenecks, black markets and a rise in prices due to the tariff effect of foreign imports.
    Mr. Budgen: My hon. Friend seems to be saying that the fact that the country is in deficit on its balance of payments is an indication that it does not rely upon world trade. That, I would put to him, is not so. That does not take into account the effect of the exchange rate, which ultimately causes equilibrium between the two sides of the balance of payments.
    Mr. Clark: That is an esoteric argument which was also propounded very eloquently by my hon. Friend's predecessor in Wolverhampton, South-West. I did not say that we were in deficit on our balance of payments in trade in manufactures. The great advantage of redressing

    1731
    that is that we still have the surplus that arises out of invisibles and the oil account.
    We must certainly pay regard to the quality of life argument. But allied with it is a much more insidious and disreputable argument that British industry is so run down and seedy and the work people are so bolshy that they simply would not take advantage of the lease of life they are given by protecting their market. They will not innovate or invest but will simply carry on making obsolete goods. It is said that, when, in the fullness of time, it was necessary to look again at the policy, British industry would be completely obsolete and even less able to stand up to the competition to which it would be exposed.
    The long-term aim of any protectionist strategy must be to make British manufacturing industry competitive again. During that interim period, with enormously increased captive markets available, the incentive principle will start operating. It requires no more powerful and active faith to believe that the incentive system will operate within our closed but highly profitable domestic economy than that it will or can operate in an economy that is open without any restriction to the intrusion of foreign manufactures.
    In an ideal situation, and as a powerful element in that ideal I count the miraculous omission of the obligation to fight general elections, if a 10-year run could be postulated for the party in power to implement its policies, it is conceivable that by exposing industry to the ruthless blast of foreign competition both management and work people might be forced into changing their attitudes and we might emerge with a new spirit and a more efficient body of corporations.
    That is very risky. The damage that could be done during that period might be lethal. Certainly the base from which to build again will be much smaller and there is always the danger that in the course of this exposure there might be major confrontations or difficulties in the broad social field which would bring down the whole edifice.
    I am certain that we shall have to come to this in the end. It is the only economic option left open to us. All I ask this evening of my hon. and learned Friend
    1732
    the Minister of State is that, in conjunction with his right hon. Friend the Secretary of State for Trade, he draws up a contingency plan and considers the various possibilities. He could, for example, examine the argument that is trotted out with such facility that retaliation is dangerous and could be disastrous. That argument will be found on examination not to have as much substance as it is believed to have by those who argue it so blithely.
    Secondly, when my hon. and learned Friend examines this strategy, will he conceive it as a major and compendious economic strategy and not simply as a piecemeal approach to save individual moribund industries with only two or three years left anyway, which will be seen as such by the work force and the management? It has to be conceived as a major and long-term strategy to revive British industry and to give it back the real confidence that it needs both for investment and for negotiation with its work force.
    7.10 pm
    Mr. Frank Hanley: I am glad that the hon. Member for Plymouth, Sutton (Mr. Clark) has concentrated on manufacturing industry. I wish to comment on that matter myself. I wish to get away from esoteric arguments about PSBR and all that nonsense.
    The Chief Secretary was interesting in revealing the Tory party's ultimate weapon in the fight against inflation. It is the passage of time. The right hon. Gentleman was precise on a great many figures, but he was not very precise about how much time would be required under Tory policy to reduce inflation to a reasonable level. The right hon. Gentleman has spoken of about three years. The right hon. and learned Gentleman the Chancellor of the Exchequer has spoken of about 10 years. I suppose that, if there were a Tory Government for long enough, inflation might come down eventually. That is hardly a politically viable economic policy.
    This is the Budget of a grocer's daughter. It is petty minded, penny pinching and Poujadiste to a degree. In my view, the key aim of economic policy must be full employment. It is totally indefensible that we should run a modern industrial economy on the basis of unused resources, whether those unused resources are the

    1733
    physical resources of factory, plant and equipment or the human resources of our workers. It is vital to concentrate our minds on how to get the economy back on the rails and back into full employment.
    One aspect of this situation—I admit not the whole of it—must be to concentrate our minds on the problem of industrial investment. My remarks may, to some extent, tie in with those of the hon. Member for Sutton. I believe that industrial investment is fundamental to the solution of our economic problems and our manufacturing industry.
    Table 1.6 on page 16 of the public expenditure White Paper is very interesting. In the five years 1974–75 to 1978–79, the figures relating to industry, energy, trade, employment and the Government contribution to nationalised industries amounted to £6·4 billion in 1974–75, falling to £4 billion in 1978–79, a reduction of £2½ billion over that period. By contrast, in the same period expenditure on health and social services and social security went up from £22·4 billion to £27·2 billion, an increase of £5 billion.
    In that period, public expenditure on what might be called the wealth-creating sector of our financial life declined sharply by one-third whereas public expenditure on health and social welfare, which I fully support and do not criticise, went up considerably.
    The situation in the period under the control of this Government is far more alarming. In 1979–80 the Government envisage expenditure in the categories of industry, employment, trade and the nationalised industries at £4·8 billion, falling by 1983–84 to £1·2 billion, a drop of £3·6 billion, or almost three-quarters, in public expenditure on the wealth-creating sector of our economy. By contrast, on health and social services, expenditure will actually go up from £27·8 billion to £29·1 billion, an increase of £1·3 billion.
    I admit that much of the increase will be caused by the terrifying increase in unemployment that the Government's policies will produce. But the really frightening aspect of the figures is the fall of £3·6 billion in public expenditure on industry, trade and the nationalised industries. This means that the
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    Government will very nearly opt out of their contribution to the wealth-creating sector of the economy.
    The short answer from the Government will be that they do not believe in public expenditure in the wealth-creating sector of the economy and that this is the business of the private sector. They will say that they do not believe in putting public funds into public corporations, that they do not believe in the NEB and that they do not believe in schemes for training and retraining through the Manpower Services Commission and the promotion of trade by public effort.
    I invite the House to study page 9 of the 1979–80 Red Book and what is set out there by way of progress in industrial investment in the private sector. It is stated:
    "The recent high level of interest rates cannot, however, be favourable to investment".
    That is fair enough. It goes on:
    "On balance total private sector investment is forecast to be roughly constant over the period of the forecast."
    So there was to be no increase in the private sector of industrial investment and a system of high interest rates would discourage it. In terms of forecasts for the economy as a whole, the same 1979–80 Red Book states that gross domestic product would fall by 1 per cent. That was hardly a factor to encourage private enterprise to invest.
    What happens when we come to the Red Book for 1980–81? My right hon. Friend the Member for Leeds, East (Mr. Healey) was right in saying that the Red Book is extremely cagey about industrial investment in 1980–81 and shirked giving any clear forecast about what would happen in that sphere. A tiny little hint appears on page 26. It is stated:
    "A significant cyclical decline in manufacturing investment is also likely".
    Under the Government's policies there is a deliberate reduction in public expenditure in any sphere of industrial investment or investment in the wealth-producing sectors of our country, industry, energy, trade, the training of people through employment policies and investment in the nationalised industries. That, according to the Government, is not on. They will not have it.
    At the same time, the Government say that, even in the private sector—the

    1735
    sector that is supposed to be the great salvation of the economy under their policies—there is to be a significant decline in manufacturing investment. The Government are also forecasting that the gross domestic product will be down by 2½ per cent. this time. The Chancellor is doing better and better. The right hon. and learned Gentleman has increased the rate of decline of GDP by 150 per cent. after only 12 months in office.
    It is not likely that we shall get substantial investment in our manufacturing industries on the policies being pursued by this Government. Lunatic interest rates are maintained for months and months. Now, according to a comment made in the debate, I understand that the Prime Minister is thinking in terms of present interest rates persisting for another two years. Who will be able to invest in manufacturing productive industry with interest rates at 17 per cent.? This is not a crisis measure or a short-term measure. I accept that my right hon. Friend, a year or two ago, had to push up interest rates to about 14 per cent. for a few weeks. We have now had 17 per cent. for several months and the Prime Minister tells us that this is to go on, not for a few months, but for years. I think that the period is now two years at least.
    What incentive or practicability exists for investment in our basic wealth-creating manufacturing industries? How on earth will the unfortunate small business man, about whom Conservative Members are always clamouring, finance his business, or even maintain ordinary cash flow, let alone invest in new machinery or new equipment, with interest rates at 17 per cent?
    The Government are compounding that by another foolishness—the high exchange rate, which is making it increasingly difficult for manufacturing industry, even the major and most efficient companies, to export successfully. A recent article in The Guardian pointed out that the rise in the value of sterling plus the depreciation of the yen has meant that the real price of British goods in the Japanese market is now 40 per cent. higher than it was two years ago. What manufacturer can sell his goods when their price in real terms because of the, fluctuation in the exchange rates—not because of strikes or incom-
    1736
    petence—means that he must sell at a price 40 per cent. higher in a highly competitive and sophisticated market? That is one example. Other markets have the same problem. The manufacturer has thus to contend with high interest rates and a high exchange rate.
    There is also the problem of the outflow of capital. The Government, by demolishing exchange controls, have demonstrated that it is not important that people invest in British industry any more. As far as I can see, investors are being positively encouraged to send their money to South Africa, Latin America, Australia or wherever else they can get a return. There is no suggestion of priority for investing in British manufacturing industry. On the contrary, there is a positive incentive to send money abroad. Thus, our valuable capital resources flow out without restriction, creating enormous opportunities for tax evasion and all kinds of fiddles in offshore tax havens such as the Bahamas.
    Mr. Alan Clark: It lowers the exchange' rate.
    Mr. Hooley: It has not lowered it yet, and I doubt if it ever will. That is the third item on the debit side of Government policy.
    The fourth item was mentioned by the hon. Member for Sutton. The Government have taken virtually no steps to curb import penetration. I do not want to go into the arguments about import controls and tariffs, but, whatever the economic arguments about the control of imports, the political arguments will soon be overwhelming. Neither manufacturers nor trade unions will sit back much longer and watch industry after industry destroyed by uncontrolled and unchecked foreign imports. There appears to be nothing in the Government's economic policy to deal with that problem.
    By demolishing the Community Land Act 1975 and by cutting down on development land tax the Government are giving the green light to speculation in land and property. When they last did that—in 1972–73—they almost destroyed the entire banking system. If people can gamble and make fortunes in land and property speculation, they will not invest capital in the more difficult and long-term activity of industrial manufacturing. There is no incentive to

    1737
    build up our manufacturing industry. On these counts, Government policy is adrift.
    The comparison with other countries is frightening. The Library has supplied me with figures for 1978 in relation to gross fixed capital formation. I accept that this goes much wider than manufacturing industry. Nevertheless, as an interesting index of capital formation the figures are: 1978, United Kingdom, £29 billion; France, £46 billion; Germany, £62 billion; and Japan, £320 billion. The figures as a percentage of gross domestic product are: United Kingdom, 18 per cent.; France, 24 per cent.; Germany, 21 per cent.; and Japan, 30 per cent.
    How on earth can we compete successfully against our major industrial competitors when the level of our investment in productive industry varies by such enormous factors? I believe that massive and sustained industrial investment should be led by public expenditure. Of course, Conservative Members will not follow that particular line of reasoning. The argument is sometimes put forward, "Though we recognise the need for industrial investment, we are not sure what we shall be selling and in what context investment will take place."
    That if a fair comment, and I intend to give one or two brief answers to it. We could invest in the energy industry, which includes energy conservation, new sources of energy, energy efficiency and techniques using combined heat and power which demand considerable capital resources. That capital would be used for new equipment and for the financing of engineering techniques. There would be a real return in economic terms because if these activities were successful—as I believe they would be—they would encourage us to economise on our use of North Sea oil and gas. Those resources could be saved for future generations or used to produce a better yield for us in our current financial position.
    Waste and waste products and the recovery of valuable metals such as tin, lead and zinc could form the basis for profitable investment. Recovery of such metals is important in view of the rising price of commodities.
    There are vast new possibilities in genetic engineering. The structure of the living cell was unravelled by British scientists
    1738
    in Cambridge. That profound scientific discovery has led, in the United States and elsewhere, to new industries based on the manipulation of recombinant DNA. We are hardly beginning to venture into that activity in this country.
    However, given the effort and the money, we could build the great new industries which are precisely what this country needs. We need a high degree of value-added expertise. We do not possess indigenous raw materials other than fuel. There is the data processing industry, of which the Post Office is making good use. There are telecommunications, satellite technology, optical fibres, microelectronics and offshore and seabed technology. There are vast technological areas in which this country possesses the necessary scientific and engineering capacity. They could be exploited if money were invested in them. If the investment is made, it will be supported by the requisite skills and scientific knowledge.
    Until now investment, public and private, has been lacking to develop those skills that would enable this country to develop new industries. I believe that a huge and sustained industrial investment programme in the order of £5 billion or £6 billion—over and above our present efforts—is essential to the restoration of the industrial health of this country as a great manufacturing power. If we had that, I would agree with Conservative Members that import controls by themselves, though they might be a useful mechanism, would not solve the problem.
    We must have investment in our existing manufacturing industry and in new industries to make sure that we can compete in world markets though it may prove politically essential to protect our own industries in the short term whatever the economic disadvantages.
    I turn to a profoundly worrying aspect of the public expenditure White Paper. The Government have taken a squalid decision to cut our overseas aid programme. In the five years between 1974 and 1979 the cost of our aid programme rose from £628 million to £795 million—an increase of 22 per cent. That is way below the international target of 0·7 per cent. of GDP which we promised many years ago, but it was achieved in difficult financial circumstances. In the period

    1739
    1979 to 1984 our overseas aid will fall from £795 million to £680 million—a decrease of 14 per cent. in the modest aid which we give to the poorest and most deprived people in the world.
    Many of my hon. Friends have referred to the attacks on social services. I support their criticisms, although I have not dealt with them in my speech. We must accept that even the poorest people in the United Kingdom do not approach the level of poverty, destitution and malnutrition from which millions of people in the Third world suffer. Cutting the aid programme is not only a curious irony in the light of the Brandt report; it is crass economic stupidity. There is little doubt that the economic prosperity of the West—or the North—is linked to the possibility of economic prosperity in the Third world, To cut the money allocated to help to promote, even in a small way, greater economic prosperity in the Third world is not only morally squalid but economically stupid.
    The Budget has many deficiencies. It would take a long time to detail them. Its fundamental economic failure is its failure to grasp the importance of industrial investment and lack of steps to develop that investment. But the most squalid act by far is the petty cut in overseas aid.
    7.32 pm
    Mr. Kenneth Carlisle: I am grateful for the chance to take part in the Budget debate. In my short time as an hon. Member of the House I have been struck by the deep wish of many of my constituents for a long-term future for Britain. They have been disillusioned by short-term measures and hollow promises designed to win electoral popularity rather than to solve our deep-seated problems.
    The real merit of the Budget is that it offers a long-term programme for Britain. In the next few years Government borrowing will fall significantly and Government spending will be held tightly in control. For the first time for many years we shall live within 'our means and spend only what we earn. As a country we shall cease to be profligate. As a result, we can offer the British people the prospect of an end to the nightmare of continuing inflation and growing debts. We can give them real hope of rising living standards after a
    1740
    further two years of adjustment. The people want that certainty, and the Chancellor is wise to seek to give it to them.
    We must recognise the considerable economic constraints within which the Budget is formed. Until the country produces and earns more, nobody can be better off. The Chancellor is right to spread the burden fairly. Not only is the Budget realistic but it is fair. Those least able to help themselves—the elderly, those receiving supplementary benefit, widows and single-parent families—are being protected from inflation. I am sure that the House will welcome that support, especially for the elderly. We have a particular responsibility to ensure that the elderly are protected.
    It is realistic to accept that we cannot provide all the benefits that we wish to give everyone until the country creates the necessary wealth. I draw special attention to two aspects of the Budget—profit sharing and child benefit. Both encourage people to work and can help to foster the extra production that we seek. The hon. Member for Sheffield, Heeley (Mr. Hooley), called for greater investment. That can be achieved only by increased production and profits. They are essential.
    The current profit-sharing scheme was introduced in the 1978 Finance Act. The concept of profit sharing has always had all-party support. It is right for employees to share in the profits which their work helps to create. Tax incentives should be introduced to encourage such schemes. However, it is generally recognised in industry that the 1978 Act provisions were not sufficiently attractive. About 200 companies have applied to participate, but profit-sharing schemes are available only to a tiny proportion of the working population.
    The raising of the cash limit to £1,000 and the reduction of the retention period from five years to two years, with the shares available tax free after seven years, are steps in the right direction. However, one is bound to ask whether the concessions will bring a rush of new companies to profit sharing. I have no doubt that they will help, but I believe that they will not have the dramatic and fundamental effect that we wish. More incentives are needed if we are genuinely to spread the idea and actively encourage the wider ownership of shares.

    1741
    I hope that the Government will regard the concessions as the first steps in a long pilgrimage.
    I am at one with many of my colleagues on the subject of child benefit. I am sorry that the Chancellor found it impossible to raise the benefit substantially. I recognise that to do that he would have had to make cuts or impose further duties elsewhere. I know that one cannot take money out of the air—it has to be raised. I want child benefit to be raised because that benefit clearly supports our aims. Child benefit makes it more worth while to work. It attacks the poverty trap. It is a move towards a tax credit system, and thus towards a simplification of our tax labyrinth. Above all, it recognises the importance of the family, on which so much Conservative thinking is based.
    I understand that the Chancellor of the Exchequer has had to work within great restraints and that he has good grounds for his actions in the Budget. I urge him to consider carefully in the next few months the role that child benefit must play in the evolution of Conservative policy. I am wholly behind the Chancellor's strategy. Above all, the Budget is realistic and fair. It gives hope to the country beyond the short term and it has my support.
    7.38 pm
    Mr. Tam Dalyell: The hon. Member for Lincoln (Mr. Carlisle) will acquit me of discourtesy if I do not follow the theme of his speech. I wish to take up where my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) left off. In the debate on the Brandt report tomorrow we shall no doubt hear a powerful oration from the right hon. Member for Sidcup (Mr. Heath), while a number of other hon. Members will make pious speeches of support. However, the Government and the Western world will not follow it up and little will be achieved. My hon. Friend the Member for Heeley was absolutely justified in his final remarks.
    I intend to ask the Financial Secretary a number of critical questions. However, it would be churlish of me not to say what is good about the Budget. I am pleased about the decision to remove electric cars from tax. Many hon. Members have argued continually during the passage of Finance Bills that the fiscal and
    1742
    tax systems should be used to conserve energy and to avoid pollution. This move is not a great measure, but it is a step in the right direction. I hope that we can return to the subject during proceedings on the Finance Bill. Do the Government now accept the principle that the fiscal system can be used for anti-pollution measures and to save energy?
    It would be churlish of me not to acknowledge the statement on the National Heritage Bill. I look forward to discussing that in detail on the Finance Bill.
    I wish to confine myself to one subject. I return to the topic that was touched on by my right hon. Friend the Member for Leeds, East (Mr. Healey), namely, tax fraud and the so-called black economy. Some hon. Members find that peculiarly odious. We have a contrast of two facts. First, the Inland Revenue has sufficient staff only to investigate properly the affairs of 2·7 per cent. of companies and under 1 per cent. of wealthy individuals. I am talking about detailed investigations. So-called savings in Inland Revenue staff will make the position worse.
    The second fact is that 1,000 extra social security staff are to be employed to look into alleged social security fraud. I gather that, at most, £50 million is involved. How do the Government justify a system of priorities in which a great deal of attention is given by investigators to some wretched woman, probably living on the edge of poverty, who may be cohabiting with a man, and less attention is given to those in the wealth bracket affected by capital gains tax and substantial estate duty? Is it the Government's policy to employ snoopers to spy on the less-well-off and to reduce the qualified Inland Revenue staff who deal with the affairs of the rich? That is an odious state of affairs.
    As a constituency Member of Parliament doing a run of the mill job, I beg leave to doubt whether there is anything like £50 million of fraud involved. I have an excellent relationship with the social security office at Bathgate. My day-to-day experience is that the office is extremely careful. The manager and her colleagues are meticulous in the work that they do on any case in which I am involved. I do not believe that there is anything like the extensive fraud that is claimed.

    1743
    I admit that, possibly, the position is more difficult for social security offices in great urban areas. But I suspect that the efficiency of the social security offices is very considerable indeed. I take this opportunity to praise the Bathgate office, which I know best. I take this opportunity also to praise the tax office, Central 1, East Kilbride, partly because it receives a great deal of adverse criticism and partly because, in the many dealings that I have had with it day by day and week by week, I have found its staff nothing but scrupulous and careful. I very much doubt whether, in ordinary tax cases, there is anything like the avoidance that is claimed.
    The purpose of my speech is to elucidate the facts. In yesterday's Budget debate, the Chancellor said:
    "The numbers employed in the Revenue departments had grown from 87,000 in 1970 to 113,000 when we took office. At that rate, by the year 2000 there would be 175,000 tax collectors, which is more than there are soldiers in the Army.
    That process of expansion is now being reversed. In 12 months' time the staff of the Revenue departments will be over 10,000 fewer than when we took office—a reduction of about 8½ per cent."
    I do not think that the Chancellor should have put forward that projection. We all know that there is no question of there being 175,000 tax collectors. No one in the House, least of all the Chancellor, does his case any good by exaggerating in that manner.
    The Chancellor then said:
    "The tax measures that I am proposing this year will in themselves enable me to make eventual net savings of 1,700 staff in my departments." [Official Report, 26 March 1980; Vol. 981, c. 1455.]
    A statement has come from the Civil Service unions to the effect that they are trying to persuade the Government to recruit more tax inspectors rather than employ 1,000 extra staff to stamp out social security fraud. The five Civil Service unions involved claim that while frauds are costing £50 million a year, the cost of evasion of tax and VAT is between £5,000 million and £11,000 million a year.
    Mr. Gerry Gilman, the general secretary of the Society of Civil and Public Servants, said in a recent article in The Times:
    "It may be that the Government is paying its political debts, but I think what it is doing is morally reprehensible."
    1744
    The article continued:
    "The unions believe that the employment of an extra 1,000 income tax inspectors and 1,000 VAT inspectors would yield at least £500 million."
    Is Mr. Gilman right, or is he wrong? I shall quote Mr. Anthony Christopher from the same article. I checked the matter personally with him yesterday. He said:
    "Between £1,000m and £3,000m of tax is not collected each year. The lower figure is precisely the figure that Mrs. Thatcher is trying to recover from the EEC."
    The article continues:
    "If that money could be collected it would be sufficient to allow for a cut of 5p in the pound in the basic rate of income tax."
    The Government claim that the extra resources that they are devoting will save £50 million, only a small proportion of which is attributable to fraud. That figure is tiny in comparison with the total benefits paid each year, and dwarfed by the amounts lost through the so-called black economy.
    A recent Inland Revenue prosecution involved a self-styled accountant who used stolen documents to swindle the tax man out of more than £373,000. It is interesting to note that in that case when passing sentence the judge said that the Revenue was losing millions of pounds a year from that type of offence. That is a statement not by me but by a judge in a court of law when passing sentence. Is the judge right or wrong?
    The Inland Revenue Staff Association, in a recent pamphlet, states:
    "It is officially estimated that between £5,000 million and £11,000 million each year escapes taxation through the 'Black Economy' —tax evasion, moonlighting, unrecorded dealings and other activities.
    This 'Black Economy' is a growth industry, one of the few success stories of British business. But what it really comes down to is fiddling the tax man at the expense of the honest taxpayer.
    And it costs the country up to £3,000 million a year in income tax—every year. It means that at least £750 million of VAT revenue is lost each year. Had this revenue been collected, the recent cuts in public services would not have been necessary."
    As what I am saying can be questioned, I should add that I am aware of the answer which was given in the other place by the Minister of State, Treasury, Lord Cockfield, on another aspect. That concerned the sheer delay in collecting tax in its more complicated forms. Can

    1745
    the Financial Secretary get any kind of statement tonight from the Minister of State, who will be winding up the debate, with regard to the question of delay? I should like to read into the Official Report what Lord Cockfield said:
    "Some £1,600 million of assessed income tax (that is, excluding PAYE tax deducted and payable by employers to the Inland Revenue) was outstanding at 7th March 1980. This included some £1,050 million"—
    These figures are mind-boggling, when one compares the £1,050 million with the wretched £50 million for which the less well-off will be snooped around. Yet they are the comparison with which we now have to deal. The answer continued:
    "for which collection has been postponed pending agreement of the liability. The amount of PAYE tax outstanding from employers is not known precisely, but in the case of those employers whose monthly payments of tax and national insurance contributions normally exceed £2.000 it is estimated to have been in the region of £200 million at 26th February. I regret that it is not possible to make any reliable estimate of the tax which will ultimately be irrecoverable".—[Official Report, House of Lords, 24 March 1980; Vol. 407, c. 600–601.]
    Are those arrears as serious as is made out? If so, how will the position be improved by cutting the number of qualified tax officials, which the Chancellor announced to the delight of his own Back Benchers in his Budget yesterday? Will the Government employ more people to reduce the huge, criminal, loss of tax evasion? The answer is that they will not. They are cutting substantially the number of staff working for the Inland Revenue. Despite the rise in VAT to 15 per cent. which, incidentally, is bound to increase attempts at VAT evasion, they are even cutting staff in Customs and Excise. More money spent on ensuring that all income is assessed for tax and that all tax is collected would yield many times the amount spent in revenue collected.
    For example, the Inland Revenue employs 300 specialist staff who are dedicated to cutting back on tax evasion. I understand that in 1978 those officers recovered about £70 million in tax, at a cost of only one-fiftieth of that amount. I am told that a VAT inspector detects at least two discrepancies in every five visits, recouping his salary dozens of times over. Any comment on the effectiveness of the VAT inspectors would be welcomed.
    1746
    The 1,505 extra fraud staff who are being employed in DHSS are expected to save only £50 million, and the emphasis is on the word "expected". Yet a similar number of staff employed in both Inland Revenue and Customs and Excise could recoup tax from fraud and evasion worth over £500 million—10 times as much. Are my statements right or wrong? Extra DHSS staff employed in visiting claimants would help to ensure that people receive their proper benefits. But that staff has been cut by thousands in the last few years. Did my right hon. Friend the Member for Llanelli (Mr. Davies) want to intervene? I shall gladly give way.
    Mr. Denzil Davies: No, I was just muttering.
    Mr. Dalyell: I hope that my right hon. Friend was muttering agreement, because he is a tax lawyer.
    Mr. Davies: I assure my hon. Friend that I was muttering agreement.
    Mr. Dalyell: To illustrate the kind of case with which one has to deal, I should like to point out that a Warwickshire business man was gaoled last year for a £40,000 VAT fraud. For two years he had been claiming tax repayments on goods which he had falsely claimed to have purchased and exported. By thus hijacking public funds he managed to support a standard of living which can only be described as well above average.
    The difficulty arises when we look at the Government's attitude. In a written answer, the Minister for Social Security said:
    "Efforts to control fraud and abuse have have been inadequate for several years. Excellent work has been done by the staff working on these problems, but their numbers are insufficient.
    That is the Financial Secretary's own colleague. He added:
    "The main problems are people who work but purport to be unemployed, people who avoid taking work or mis-state their assets, income or family circumstances".
    At the end of his answer he said:
    "There will be an extra 170 liable relative officers and a further 270 fraud specialists. Special arrangements have been made to monitor the results of this extra effort".—[Official Report, 13 February 1980; Vol. 978, c. 710–11.]
    I suggest that that extra effort is put in, entirely the wrong place. People who work for the Inland Revenue and Customs:

    1747
    and Excise are anxious to ensure that staffing levels are adequate for the job, because the honest taxpayer has an interest in fighting the black economy. We should take far more of an interest in fighting the black economy than in fighting petty fraud. Tax fiddling—again, this is an Inland Revenue Staff Association assessment—costs as much as £3,750 million a year. That is about £75 a year for every man, woman and child, or £6 a week for an average family. Therefore, when one complains about the stoppages from one's pay packet, it should be remembered that if everyone paid his fair share of tax, one could be much better off.
    Honest traders suffer by having to compete against those traders who either ignore VAT and so charge lower prices or charge VAT to the customer and pocket it instead of passing it on. In the face of such subsidised competition, the pressure on an honest trader to defraud must be immense, and we know that that happens. Indeed, fraud by two groups of related companies led to £265,000 of profits missing the Inland Revenue's scrutiny. After court proceedings to recoup unpaid tax and interest owed on it, almost £250,000 was recovered.
    Those figures must be compared with the problem of the people about whom my hon. Friends and Members for Liverpool, Walton (Mr. Heffer) and Heeley referred.
    Mr. William Waldegrave: I sympathise greatly with the case that the hon. Gentleman is making. However, in order to right the balance, perhaps I should add that this does not relate only to companies or large organisations which may defraud the tax man. Every citizen who pays a plumber in cash is probably adding to the problem of the black economy. This is not just a problem of distant organisations. It is a problem which all of us face from time to time.
    Mr. Dalyell: I accept that. Of course, as people begin to realise that the big fish in the pool are not being dealt with, there is a natural human reaction among smaller fry to ask "If the big fish get away with this, why should we be honest, as we have been in the past?" I believe
    1748
    that is very serious for the fabric of society.
    The self-employed and directors of private companies need more attention from the Inland Revenue to ensure that they pay the right amount of tax. To assess them properly for tax requires much checking of payments, receipts and so on. Any cutback in Inland Revenue numbers inevitably means less checking of tax bills of the self-employed, who have a greater opportunity to avoid paying their fair share, while those who work for an employer continue paying their tax under PAYE.
    I shall cut my speech short because I know that others of my hon. Friends wish to speak. I could go on, but I hope that I have made my case. I should like to say one further thing. A report in The Guardian, under the byline of Tom Tickell, states:
    "A confidential document has gone out to district tax inspectors telling them that they will get less information about bank savings and sales of property…The document, which was sent out last week, says tax inspectors will get no details about interest paid on bank deposit accounts if it comes to less than £150 a year.
    This figure is six times higher than the previous £25 limit. There have been changes on the same scale covering National Savings Bank returns and interest elsewhere. Details of property sales will only reach the taxman if they are worth 00.000 or more. Until now the limit has been £12,000.
    The new limits are part of the Inland Revenue's attempt to cut staff in line with Government orders. More than 2,000 people are to leave over the next two years as a result of changes in administration.
    About a quarter of those jobs will disappear in the office which produces detailed information for tax inspectors.
    Between £1,000 million and £2,000 million of tax are lost through tax evasion each year—and the figure is arising.
    Changes were made in the checking system two or three years ago. Instead of a detailed look at every account, tax inspectors now concentrate on 4 or 5 per cent. each year, particularly among the self-employed.
    They have power to demand accounts of all payments made in the past seven years. Where they suspect that there has been fraud or wilful neglect their inquiries can go back before the war. The Inland Revenue claims it gets extra payments in most cases.
    There have been other schemes for cutting down tax frauds. One of them, the Leeds Experiment, involving cooperation in individual cases between tax inspectors and Customs and Excise staff who handle VAT."

    1749
    It is very unwise to stop that type of experiment. The article continues:
    "The Inland Revenue wanted to extend it across the country, but plans have been postponed."
    Have they been postponed? If so, why? The Minister of State told the House in January that no decision would be taken until an official committee, looking into the powers of those two bodies, had reported. Has that official committee reported? The article continues:
    "Commenting on the decision to cut information, Mr. Tony Christopher, general secretary of the Inland Revenue staff association, said last night:
    Far from reducing the Inland Revenue's resources, we should be redeploying them to cut tax fiddling. The fuss over Britain's contribution to Europe on the size of the public sector borrowing requirement would subside if we even collected half the tax which people should pay—but we don't'."
    The Minister of State, Treasury will remember that some of us listened to his speech with interest the other night when he discussed the question of the European budget. Those of us who have had dealings with Mr. Christopher know that he is a highly responsible man. Is he right or wrong? We are dealing not with trivial amounts but with vast sums. The story goes on:
    "A London tax inspector commented: 'This decision will cut out information on which we rely to bring half our present cases. These details are known as "can openers" in the trade—because one lie usually implies others.
    If we know that someone has bought a house for £20,000 when he claims he has no money, there's obviously something to investigate.
    Big properties are not where people give themselves away. "Some cash traders can put £1,000 of undeclared profits into a whole series of banks without us knowing. He can use the interest from all of them to buy a small property without us knowing. And he can lease it out without us knowing. Finally, he can sell it again—for £50,000—without us knowing. It's a tax fraud charter'."
    One could go on for a long time. I do not mind whether the Minister answers my question on Monday or Tuesday. I shall attend the debates and I shall listen.
    I hope that the Minister will give serious scrutiny to the case that I have deployed. If the Inland Revenue staff federation is talking through its hat, and if other inspectors are wrong, let that be proved on the Floor of the House. Let Ministers say that words of the hon. Member for West Lothian are all factual
    1750
    nonsense. If, by chance, my remarks are not factual nonsense and if my case is close to the truth, this will prove a serious issue.
    The Government should stop trying to get social security inspectors to harass people who already have endless problems. Every Member of Parliament knows that such people live on the margins of poverty. The Government should concentrate their minds and their expert resources on the type of people that I have been talking about. The sooner they do so, the healthier it will be for the British economy.
    8.5 pm
    Mr. Nick Budgen: I agreed with the remarks of the hon. Member for West Lothian (Mr. Dalyell) to a limited extent when he referred to the frauds perpetrated on the tax system. No Conservative Member would wish to support such frauds. We are aware that any fraud leads to an increased tax burden for the rest of our fellow citizens—and ourselves—who pay their taxes honestly.
    My right hon. Friend the Chief Secretary to the Treasury said that the Government's principal aim was to reduce the rate of inflation. Perhaps he would say that they want to kill it. He said that it would be impossible to do so by means of a cavalry charge. I assume that inflation is to be slowly ground down at a long slow trot over a period of about four years. But I believe that a cavalry charge would engage the interest and support of the public. Indeed, it might do so more effectively than a long slow trot. The danger in the Government's Budget is that they may have placed too much, emphasis on the medium and long-term, and too little on what the Budget can achieve. It is easy to say that the money supply will be controlled in two, three or four years. It is easy to find reasons for not controlling it this year.
    I am a staunch supporter of the Government's general strategy. I have consistently urged them to publish medium-term forecasts for the PSBR and the money supply. However, excellent though the publicity given to those forecasts is they are no substitute for action today. I note that just as the Red Book says that there can be changes in the tax take, and unexpected changes in commodity prices, so there can be unexpected changes

    1751
    in political actions. To sustain declining public sector borrowing., requirements, declining monetary targets over four years will need a great deal of political will. I am a supporter of the present Government, I believe that the main thrust of all economic activity should be devoted towards reducing the rate of inflation. The more one hears Members such as the hon. Member for Liverpool, Walton (Mr. Heffer), the more one knows that there are many who regard unemployment as at least as great, and arguably a greater evil than inflation.
    That view is not found only on the Labour Benches. Understandably and rightly, it is felt to a lesser extent throughout the country and on the Government Benches by some of my hon. Friends. We shall have to sustain popular support for an unpopular fight over about four years. I sincerely hope that it will be possible to do so, but I should like to see a bit more activity this year.
    It is easy to approve of a reduction in the money supply in 1983. However, if that request had to take immediate effect, strong and specific reasons would be put forward why it was not convenient to pay that price at that time.
    I do not wish to be over-critical, but I invite the House to consider what has happened to the money supply recently. We have had a slight re-jigging of monetary targets. At paragraph 6 on pages 20 and 21 the Red Book says that in the period up to mid-February of this year the money supply as measured by sterling M3 was growing at 12·1 per cent. However, that did not stop the Government from putting a further £1½ billion of liquid funds into the monetary system, at a time when it is generally agreed that, because of the effect of the corset, the figure of sterling M3 underestimates the amount of money in the system. Without the distorting effect of the corset the money supply figures would probably have run at 14 or 15 per cent.
    We were told at the time that the £1½ billion was put into the system that it was not appropriate to allow interest rates to rise before the Budget. No further explanation was offered. I do not know why it was not appropriate to allow interest rates to rise, but they did not rise. To concentrate on the next two, three or four years is not an adequate substitute for introducing immediately the
    1752
    harsh measures necessary to bring back sound money into our financial affairs.
    The Financial Secretary to the Treasury (Mr. Nigel Lawson): I always listen to my hon. Friend with a great deal of interest, but he is not quite right. We at no time said that the arrangements in the money market were made to avoid interest rates going up before the Budget. We were dealing with a situation of technical tightness produced by a combination of the tax collecting season and heavy sales of gilt-edged securities.
    The money supply over the first four months from June had gone up by 14 per cent., as opposed to by sterling M3, with a little bit extra for disintermediation. The rate for the succeeding four months has come out at about 10 per cent. without any significant disintermediation. There has been a marked deceleration in the money supply.
    Mr. Budgen: I hope that when the money supply figures come out they will prove me wrong. I cannot immediately turn to the passage in the Official Report where my hon. Friend produced that technical argument, which I concede he did. However, I remember when the question of the increase in the money supply was first put by the right hon. Member for Leeds, East (Mr. Healey) to my right hon. and learned Friend the Chancellor of the Exchequer. My right hon. and learned Friend said that one reason for putting extra funds into the market was that it was not appropriate to allow interest rates to rise before the Budget. There may have been a number of reasons, but that was one.
    The money supply figures will come out, and I hope that I am wrong in saying that the money supply was technically increased. The way that the Chancellor has rolled forward the target, as set out at column 1444 of the Official Report, has increased the target by about 2 per cent. My simple proposition is that it is extremely easy to propose to do something in two or three years' time but often difficult when the time comes for it to be done.
    Mr. Denzil Davies: Does the hon. Gentleman agree that if his hon. Friend is right—that this release of money to the banking sector, especially the £500 million in relation to gilts, was merely a tech-

    1753
    nical operation—the Government will call back that money quickly?
    Mr. Budgen: I expect so, but in time all will be revealed. We shall find out who is right. It is not reassuring to see that the target has been rolled forward, as the Chancellor says.
    I continue the same argument. I wish that the public sector borrowing requirement this year had been a good deal smaller. I do not wish to baulk the issue. It would lead to disagreeable measures. It should have been possible to introduce Health Service charges for visiting a doctor. The Government could have introduced "hotel charges", as they have been called, for people in hospital, with proper mitigation if the patient could not afford those charges. There is a strong case for indexation of the specific duties on petrol, cigarettes and drink. I regret that a preoccupation with the retail price index has probably dissuaded the Government from increasing those taxes.
    Mr. Nicholas Winterton: Does my hon. Friend agree that the precedent has been set for a food charge for people in hospital? Retired people, who are a deserving sector of the community, have a sum deducted from their pensions to take account of the benefit that they receive from being in hospital.
    Mr. Budgen: A precedent has also been set in prescription charges. There is no great difference between charging for medicine and charging to see a doctor. I see no difficulty there, and I wish that the Government had been slightly more aggressive.
    Substantial sums could also have been saved by increasing rents in the local authority sector. I accept that that would be unpopular. I note that in 1979–80 the Government subsidy was running at about £1½ billion a year. I should have thought that some increase in rents was probably necessary in order to encourage sales to sitting tenants. However, the Government have decided not to do that. I understand the arguments against those specific proposals, but none the less I regret them.
    I regret particularly that the sale of public assets seems to have stopped. I concede that the sale of public assets should not be described as a reduction in
    1754
    the public sector borrowing requirement. It is a means of attracting money into the public purse by other means.
    It is said that we are laying up for our children and our grandchildren a vast burden by selling gilts on a 15 per cent. coupon on which the interest has to be paid for many years, and that any change in the conditions upon which that money is funded is likely to lead to difficulties in the gilt market. In that case, why do we not sell other forms of paper? That would be a way of overcoming a temporary funding problem. I am sorry that the right hon. Member for Down, South (Mr. Powell) has left the Chamber. He would be in favour of selling some of our gold reserves. Other people would be in favour of selling more shares in BNOC. The principle is the same.
    Mr. Waldegrave: Will my hon. Friend urge the Minister—who I suspect is sympathetic—to reconsider the idea of selling floating rate Government stocks?
    Mr. Budgen: That might be a possibility. I do not pretend to know what forms of stock are attractive to the gilt market, and it is not necessary for me to inquire into the details of that. However, if it can readily be seen that those who hold gilts have been buying stock which gives them a 15 per cent. return into the next century, some method must be found that reduces the attraciveness of those gilts. There may be a hiccup in the market, but we must find a way to reduce the attractiveness. Perhaps my hon. Friend the Member for Bristol, West (Mr. Waldegrave) has a good idea.
    Mr. John Browne: The unattractiveness of the floating rate gilt is that major institutions, which are the main buyers of gilts, already have bank loans that float, and many institutions have fixed obligations on the other side.
    Mr. Budgen: That may be an argument against the suggestion of my hon. Friend the Member for Bristol, West, but I am not competent to decide.
    I regret that the Government have not carried out their promised reform of capital taxation. They are sincere in their desire to encourage wider share ownership, and I approve of their proposals for making share ownership easier and

    1755
    more attractive to employees, but surely we want people to find it easier to buy and hold shares so that they take a real interest in the companies in which they have invested their money.
    We now have a well-housed nation and a nation in which housing has become a major investment for most of our citizens. However, there has been a major decline in the share of wealth employed by individuals and invested in equity shares. The two principal disincentives for share ownership are the investment income surcharge and capital gains tax. Until the Government change those taxes there will never be a vibrant share market in which private individuals invest directly. A market in shares that is dominated by the institutions is bad for the country. I take a different view about speculation from that taken by Labour Members. I believe that speculation based upon differences of view stabilises the market and helps it through the recurrent crises that are an inevitable part of the way in which our economy is managed by politicians.
    The investment income surcharge should be abolished so that people do not suffer a disincentive when they invest directly in shares. It is wrong to distort the market in shares in favour of any one class—whether directors, employees, or any single group. This major indiscriminate disincentive should be abolished.
    I agree with the Chancellor of the Exchequer in wishing to see the disaggregation of vast conglomerate companies which, because of their profitability in one sector of the economy, are able to gobble up other successful companies. One of the reasons is that when a company makes vast profits and finds itself sitting upon a cash mountain, it is difficult for that company to disgorge the profits. It is to the disadvantage of the company, and to the disadvantage of the shareholders, because in the hands of the shareholders the disgorged capital is either eaten away by income tax—if it results in the form of an income payment—or, if it is disgorged by way of capital note—as occurred with GEC some years ago—the funds paid out under the capital note may be subject to capital gains tax.
    1756
    I hope that in the next Budget we shall move towards the abolition of capital gains tax. That must be done in the next Budget, because I believe that the political will to make such a major reform will be impossible as we approach the next general election.
    8.29 pm
    Mr. David Winnick: Let me offer some hope to the hon. Member for Wolverhampton, South-West (Mr. Budgen). The way the Government are going it is likely that the charges that he would like to see will be introduced. In the meantime, perhaps the Labour movement will ensure that greater publicity is given to the hon. Member's remarks so that we can explain to people throughout the country what he and other Conservative Members would like to do.
    The Budget is a recipe for a substantial increase in unemployment. Undoubtedly one of the most beneficial gains in Britain during the post-war years was the elimination of the kind of unemployment that was suffered by so many people before the war. The misery and all that went with large-scale unemployment was virtually eliminated in post-war Britain. Now, once again, in the 1980s we see people rotting in the dole queues and the Government admitting that unemployment will get worse.
    It is easy to talk about unemployment. The House should remember what it means in human terms. We should bear in mind how it feels to leave school and not find a job. That is happening to many young people in many parts of Britain today. They have a feeling that they are not wanted. It is not very pleasant to spend the first few years of one's working life on the dole, unable to find a job.
    At the other end of the spectrum there are men in their forties or early fifties who have been made redundant and who cannot find another job. Many of them know that they are not likely to find any further employment before their normal retirement. They will spend those years in a vain search for employment. I had hoped that we had seen an end to that type of misery and humiliation.
    The Government do not say that they must do whatever they can to eliminate unemployment. Instead they say that it

    1757
    will increase. Both the Prime Minister and the Chancellor of the Exchequer have said so. For the first time since the 1930s the Government say that unemployment is inevitable and acceptable—that is what it means in ordinary terms. The position is made worse by the fact that the Government intend to phase out and then abolish the earnings-related unemployment benefit. In other words, they intend to punish those who are made jobless. They want to make the position even worse. This offence of undermining the position of the unemployed by taking away the earnings-related unemployment benefit is something that millions of people will never forget or forgive.
    The fact that we shall have hardly any growth during the next few years is also a matter for concern. That is why I have described the Budget as a recipe for a substantial increase in unemployment. There is despair in many parts of Britain about the position in the various regions, and the trade union movement will fight as hard as possible against a return to the conditions of the 1930s.
    I declare an interest in that I am, and have been for many years, an active trade unionist and I am proud of that fact. Conservative Members have complained about the TUC's call for a "day of action" on 14 May. Conservatives should be very careful unless they provoke the trade union movement and the organised working class of this country into a general strike.
    The withdrawal of a good part of the social security benefit for families of those on strike will be rightly seen as a continuing campaign of hostility against the trade union movement. The Tories have said on so many occasions—both from the Front and Back Benches—that they are not against the unions. However, it is interesting to see that time and time again when they are in office they bring forward every measure possible against the trade union movement.
    Those who go on strike, officially or unofficially, know that at present no benefit is paid to the striker himself. A sum of f15 is deducted Now another £12 will be taken away, and the families of strikers will be virtually starved. I suppose that Conservative Members will say "They should not go on strike in the
    1758
    first place", but this is a free country; and it is interesting to note how selective the Conservative Party is about ballots. As long as we remain a democracy, working people have a fundamental right to withdraw their labour, but it is clear that the Government intend to cause as much difficulty and hardship to those who exercise that right, and the hardship will be directed at the families. It has been said that if someone is convicted of an offence and goes to prison, his family, in many cases, is supported. But, apparently, that policy will not be exercised on behalf of the families of those who withdraw their labour.
    I turn now to imports. I believe that the hon. Member for Plymouth, Sutton (Mr. Clark) was on the right lines. It is necessary to control excessive imports into the United Kingdom. Let me briefly outline the position as it was last year. Imports of manufactured goods rose 10 times as fast as exports. The export of machinery of all kinds fell by 1 per cent. while imports rose by 20 per cent.
    Mr. John Browne: Are not many of the imports at the moment coming in because of lack of availability in this country? Therefore, if we increase import controls, the rate of inflation will be increased because there will be shortages.
    Mr. Winnick: I am familiar with that argument, and other arguments have been used and were quoted by the hon. Member for Sutton. Regardless of the problems, I am not suggesting that this is a panacea for all our economic ills. It would be foolish to think that. But if we are to give effective protection to our manufacturing industry, import controls are necessary on a far wider scale than at present.
    In my part of the West Midlands we have faced many problems following redundancies and closures. Like so many in the region, I take the view that import controls should be on a wider scale. The difficulty of imposing import controls late in the day was illustrated by what happened in the textile industry. Controls can be brought in too late and at a time when they possibly will not do much good because the industry has reached such a state of decline. I hope that that will not happen in the manufacturing industries generally and certainly not in the engineering industry.

    1759
    To export has been made more difficult by a very unrealistic exchange rate. The present exchange rate is causing tremendous difficulty in manufacturing industries and I think that that is recognised throughout the House.
    I want to deal with one matter that was announced by the Secretary of State for Social Services earlier today. I have been involved in trying to ensure that people on low incomes receive assistance with paying their fuel bills. I brought in a Ten-Minute Bill, which was not opposed. It seems to me to be right and proper that people on low incomes should receive some assistance in view of the substantial increase in fuel prices. The price of electricity has increased very substantially, and the price of gas is to be increased by 30 per cent.
    I was disappointed in the measures announced by the Secretary of State earlier today. Undoubtedly they will help those on supplementary benefit. Those who receive social security will receive greater assistance. That is right, and I accept it. But not a penny will go to any pensioner or anyone on a low income who is not receiving supplementary benefit or family income supplement.
    I received quite a few letters arising from my Ten-Minute Bill. Pensioners wrote to me to explain the problems that they face in trying to keep their homes warm. Many of those pensioners will not receive any help because they are not receiving supplementary benefit. This may not be the most appropriate occasion on which to repeat my argument that it is necessary to introduce a national fuel rebate system so that those who are on low incomes, but not necessarily on social security, are able to receive some help in paying their fuel bills. If such a system is right for rate and rent rebates, why should we not have the same system for fuel bills?
    The Budget comes as no surprise after all the leaks. No doubt Conservative Members who take a more liberal position on social policy, unlike the hon. Member for Wolverhampton, South-West, will be somewhat disappointed. We shall see how far they are willing to register their disappointment when it comes to a vote on child benefit. We shall see whether they are willing to be as strong over their principles as some of my hon
    1760
    Friends and myself when the Labour Party has been in office. Labour Members have been willing to abstain or to vote against Labour Governments.
    The Budget will be a tremendous disappointment for millions throughout the country. It will signal more unemployment, more misery and more poverty. It is a Budget that should be totally unacceptable to the House. One hopes that there could be a majority to reject it on Tuesday night.
    8.42 pm
    Mr. John:Browne: I believe that history will record this Budget as a Budget of opportunity. I hope sincerely that the House and the country will recognise it as such before it is too late.
    This Budget of opportunity has three basic characteristics: it is enlightened, realistic and well balanced. It is enlightened because it spells out a medium-term financial strategy rather than the short-term expediency plans that we have had in the recent past, most of them clouded in mystery. At long last, business men will be able to plan within a national strategy. This will surely he welcome as a new luxury.
    Secondly, the Budget takes an enlightened view and action on the difficult task of rejuvenation of our inner cities. That plan will be examined with great interest by other Governments in other industrialised countries.
    Thirdly, the Budget will take enlightened action towards new and small businesses, the one certain source of new products, new profits, new profitable jobs and a real increase in the standard of living for us all as a nation.
    The Budget is realistic, first, because it accepts the realism and the awesome impact of the present world recession—a world in which Britain now has, regrettably, a relatively small influence but in which, if we are successful, we could regain great influence.
    Secondly, the Budget is realistic because it faces the paralysing effect on our economy of 20 or 30 years of Socialist policies—policies in which arrogance has reigned supreme. That is the arrogance that says that the State knows better than the public what is good for us, what

    1761
    products we should produce, how and where we should work and at what price we should buy and sell. That arrogance has killed the incentive to work, to sell or to take risks. It has left us with an under-motivated, over-employed and outdated industrial economy—and that in an age of technology.
    The Budget accepts these sad facts and the low growth that we can expect over the next year or so. It is realistic in that it accepts that a policy of reality, of restoring sanity, profitability and sound money, will expose much employment. Labour and Liberal Members may not like to accept it, but monetarism in itself does not create unemployment. It exposes rather than creates; it exposes over-manning; it exposes unprofitable companies, industries and jobs; it exposes latent unemployment—unemployment which is already in the system but which has been kept from public view by Government subsidies, financed by high taxation and Government borrowing—in short, employment subsidies subsidised by inflation.
    Unemployment is a massive world problem. In reality, we shall certainly have our own fair share of it. However, the Budget faces the facts realistically by its balance and its concentration of social benefits upon the truly needy. The balance of the Budget is shown by the fact that, first, it accepts time lags. The contraction of the money supply under the Budget is gradual. It is much more gradual than many people would wish it to be. However, it faces the recessive effects of past cuts in planned spending. It faces the fact of a world recession of major proportions. Therefore, it will avoid a depression in place of a recession, and it will avoid industrial anarchy in place of industrial tension.
    Secondly, the Budget exposes more latent unemployment, regrettably, to add to that which we already have. I therefore welcome the boost to new and small businesses and to city centres. It will create not just jobs but more profitable jobs and so help to balance the side effects of reverting to sound money.
    Thirdly, the Budget appears to accept that the Government must help the genuinely unemployed in the agonising national transition from outdated indus-
    1762
    try to developed technology, from unreal to real jobs. Therefore, although some of the £20 billion spent on social services had to be cut, I am pleased that the net effect of the cuts and increases will be the establishment of a new safety net for the needy—a net increase of approximately 4 per cent. for the needy and their families. To me, that is balanced, humane and fair.
    Finally, I believe that the Chancellor struck an excellent balance in his policy towards taxes. Remembering that our main aim is to kill inflation and that people's expectations are absolutely key in the inflation equation, it is vital not to boost the retail price index. Therefore, although many of us expected, and indeed would have willingly accepted, greater increases in customs duties, I was glad not to see them. I was also glad that VAT was not increased. But we must remember that the price of holding down any increases will be a reduction of further Government spending.
    This was a long Budget. Therefore, in consideration of others who wish to speak, I shall comment briefly on specific points from now on. I welcome the provision for defence and law and order as a necessary insurance. I should have preferred more provision. However, I realise that we cannot—and that, worse still, as a nation we will not—afford it.
    The corset—here I declare an interest as a banker—was not working effectively, especially after the lifting of exchange controls. It certainly lost credibility after the Government intervention with the purchase and sale of gilts, which my hon. Friend the Financial Secretary referred to as a certain "technical tightness". Therefore, I welcome the abolition of this item, which at best discriminated against British banks in a very competitive international market.
    I refer now to the cuts in bureaucracy. I was impressed that the Chancellor concentrated not just upon reducing the numbers of Government employees but upon the simplification and streamlining of bureaucracy. However, much more must be done to cut numbers and to sell off Government office space. Only when I see the "For sale" boards outside Government offices will I believe that the Government's policies have been effective in this respect.

    1763
    On the subject of strike pay, I welcome the reduction in the present Government-taxpayers' subsidy to strikers as regards their family responsibilities. However, at a time of deep recession, high inflation and high taxation, is it really morally justifiable for men or women who withdraw their labour voluntarily to expect their fellow countrymen to subsidise them with their sweat? I believe that the unions should pay the whole sum, as they did before 1964, and that unionists should face this responsibility, as all the rest of us have to face it.
    Mr. Winnick: The hon. Gentleman began by saying that he was a banker. Now he is telling us how right it is that strikers' families should be penalised. Is it not a fact that in the banking world it took years and years before the unions received any recognition at all from the employers? The hostility of bankers generally to trade unionism is well known and established.
    Mr. Browne: I was not trying to say that it was right for the Government to hurt the families of strikers. All I am trying to say is that the responsibility is on the people who withdraw their labour. It is voluntary unemployment, not unemployment that has been induced by the collapse of an industry or a company. That is the crucial point.
    Mr. Winnick: Answer the question.
    Mr. Browne: I cannot honestly remember the exact details of union recognition in the banks, so I really cannot answer that question. But I do not see that it has any real relevance to what I have just said.
    I have already mentioned the inner cities, but I must add that I welcome the restriction of tax reliefs to taxes on property, because I think that this will make it possible to avoid industrial piracy. I also believe that if the Government are successful in gaining the support of the local authorities, which are of key importance in this, in providing the basic infrastructure—roads, electricity and water—and also the support of the banks and others like them in lending to the entrepreneurs—in short, if this plan is accepted as an opportunity by these people—these areas will become microcosms of
    1764
    successful free enterprise and major creators of profitable employment.
    I believe that the Government's expenditure of £160 million on incentives for small business is long, long overdue and that this money is very well spent. Healthy new and small businesses are vital if we as a nation are to achieve a technological revolution such as is already being experienced in the United States, Germany, Japan and Switzerland. We must follow if we are to become a developed technological nation rather than, as we are rapidly becoming, an underdeveloped industrial nation.
    Therefore, I welcome the provisions that this Budget has made for small business. I was going to expand on these but, to be brief, I think basically that the most important one besides CTT and VAT is the "de-merging," as the Chancellor called it. I very much welcome this. If we can combine it with the Department of the Environment urging local authorities to be more liberal in the change of usage of farm buildings, it will have a major impact on restoring vitality to the rural areas.
    As I said, I welcome the Budget. However, I am very concerned at not seeing in the package for small businesses the removal of the discriminatory national insurance stamp for the self-employed. Here I must declare another interest as a small business as a self-employed man. I am also very concerned not to see some provision made for companies to repurchase their own shares in the form of Treasury stock, as is done in the United States, because I believe that this would be a further incentive for capital to be attracted into new and small businesses.
    In closing, may I say that I think this is an excellent Budget in the circumstances of today. However, as I tried to indicate in my question this afternoon to the Prime Minister, I do not believe that monetarism will work effectively unless there is a free market.
    In Britain today a free market does not exist. We have two giant cartels—the trade unions, particularly those operating a closed shop without secret ballots, which can demand, and public employers which can pay wages and prices out of all relation to the market place. That is certainly no free market. Between these two giant cartels, private business, particularly small business, is often squeezed out, and will

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    continue to be so despite the financial incentives contained in the Budget.
    I therefore beg my right hon. and learned Friend the Chancellor to impress upon his colleagues in the Treasury and the Cabinet the urgent need to make further real cuts in bureaucracy, to increase greatly the programme of denationalisation, if necessary by packaging profitable and unprofitable companies into conglomerates to make them more attractive to sell off to the private sector, and to restore true democracy to the trade unions for ordinary working men and women, particularly in respect of the closed shop and secret ballots.
    If this is achieved, I believe that his tory will record this Budget as one of great opportunity, a Budget that signalled the time when, at long last, the British nation had the good sense to wake up and had the wisdom to face reality and the courage to act upon it.
    8.56 pm
    Mr. Nicholas Winterton: I am pleased to follow my hon. Friend the Member for Winchester (Mr. Browne) and to join him in warmly welcoming the announcements made by my right hon. and learned Friend the Chancellor of the Exchequer on the encouragement that will be given to de-merging and on the incentives that are to be given to the small business. Beyond that, I hope that my hon. Friend will forgive me if I do not follow him in his well-thought-out and concise speech.
    I am sure that the lion. Member for Walsall, North (Mr. Winnick) will be interested to hear that I agree with his approach to import controls. Before long, I believe, the Government, even this Conservative Government, will be forced to go along that path.
    I am sure that my hon. and learned Friend the Minister of State will expect me to say that I consider this an excellent Budget and that I have no complaint of any kind about and nor do I cavil at its contents. I apologise to my right hon. and learned Friend for not being able to go that far, although I believe that the Budget has been well considered. It is a sober Budget that has been welcomed in the House and in the country. If the instant reaction that I have received from my constituents is anything to go by, the
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    overall content has been very gratefully received.
    The people who are in a position to provide investment believe that the Government have got their sums about right and that there is not just a flicker of flame but a glimmer of firm light at the end of the dark tunnel. Although we undoubtedly have two hard years ahead of us, the nettles have been grasped. The monetary supply is to be brought under control, but monetarism in the purist sense is not necessarily to have its way, for in many respects the Budget has gone off the total monetarist line. The supply of money must be reduced, public expenditure as a percentage of our GNP must be brought under control and the steps that the Government are taking will direct us down that solid if difficult path so that we shall achieve genuine prosperity before long.
    I particularly welcome the increased expenditure on law and order. In my constituency, which has suffered some of the most brutal murders in recent years, in Prestbury and elsewhere—and just outside my constituency there was the boarded barn murder—I am confident that the increased expenditure on law and order will be warmly welcomed.
    I also welcome increased expenditure on defence. Defence is the first priority of any Government, of whichever political party they are comprised. If a country is unable to guard against external aggression, what is the point of the most expensive social policies? We shall not be in a position to enjoy them. I also appreciate the 2 per cent. increase in health expenditure, announced in the Budget, over the immediate years ahead. My constituency has the benefit of a new hospital. Such facilities are urgently required in other areas of the country.
    I should like to refer to the concise and thoughtful contribution of my hon. Friend the Member for Lincoln (Mr. Carlisle), who gave a sincere message to the Secretary of State for Social Services indicating how many hon. Members on the Conservative side feel about child benefits and their importance in helping the family. Many of my hon. Friends believe that this is the most effective and positive way of helping the family. We hope that in future years, when prosperity improves, a greater increase will form part of the Budget package. The percentage increase

    1767
    that has been announced is helpful. I am happy that the increase has been announced, although I should like to see a greater amount. Within the funds available, the Government have done as much as they can, and I hope that my hon. Friends who feel even more strongly about this matter than I do will give the Government their support for the overall package that has been announced to help families.
    I should also like to refer briefly to the speech of my hon. Friend the Member for Plymouth, Sutton (Mr. Clark), who presented an excellent case for import controls. I take up the point made strongly by the hon. Member for Walsall, North. His speech was relevant, just as it was provoking. I find myself in considerable agreement with him. I share his view that the Government will have to take steps along this path before long if we are not to destroy the major part of our manufacturing base or, to use Treasury jargon, the supply side of our economy.
    For example, if the textile, paper and board industries are to be saved from virtual extinction, selective import controls are vital. I believe that we should encourage the workers at Leyland to continue to support the package announced by Michael Edwardes and give him and the company a real opportunity to put Leyland on a sound footing. This is vital for the future economy of the country. For a short period, even in the car industry, limited import controls, I believe, are vital.
    There were massive imports last year of greetings and Christmas cards from the Soviet Union. Together with other commodities in the paper and board sector, this huge amount of imports is putting good, moderate and responsible working people in this country out of a job. Bearing in mind Soviet aggression in Afghanistan and the serious nature of that invasion, we should take all possible action in the economic and trading spheres against the Soviet Union and other Eastern bloc countries that support its action. It is wrong that skilled and moderate workers who have served their companies and their industries well should be placed on the dole and made redundant as a result of what I can only describe as subsidised imports into this country.
    Since the beginning of the year an average of one textile mill a week has closed.
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    Woodrow Universal, in my constituency, has announced that it will close entirely. Having declared a few workers redundant a couple of months ago, the company now finds itself in an impossible position because of the level of unfair, subsidised competition from abroad. This means that 100 people in my constituency will be placed on the dole. That is very unfortunate.
    I have raised in recent weeks a number of matters with the Department of Trade. On behalf of the clothing and textile industry, the hon. Member for Bradford, North (Mr. Ford) and f wrote a strongly worded letter to the Secretary of State for Trade. He replied in due course and has been as helpful as he can. He says that low or falling demand for some products and the fact that the artificially high value of sterling has had the effect of encouraging imports and stemming our exports are the major reasons for the problems in the textile industry.
    Perhaps he is right and these matters go to the heart of the problem. Perhaps British industry is suffering from the effects not only of a world recession but of a sudden change of course in Government economic and monetary policies. The immediate result of those policies has been a high level of inflation, a squeeze on credit and a considerable reduction in consumer spending power. That, inevitably, has affected industry.
    I do not believe that we should allow our manufacturing base to be further eroded, particularly when the Secretary of State goes on to say in his letter that one of his duties is to maintain an open market for United Kingdom exports. But what is the point of maintaining an open market for United Kingdom exports and at the same time offering an open market to imports if many of the countries to which we are exporting exercise controls against us as and when necessary?
    I am grateful to the hon. Member for Gateshead, West (Mr. Horam) for allowing me time, but I shall take only one more minute.
    I welcome the measures on small businesses. I hope that I do not echo too many hackneyed phrases when I say that oak trees from little acorns grow. I respond to the speech made by the hon.

    1769
    Member for Sheffield, Heeley (Mr. Hooley) by saying that new ventures are vital if this country is to survive. Those ventures must make profits, because profits create further investment and further investment creates jobs.
    Surely at this time, with unemployment coming up to 1½ million, we must encourage profits so that there is investment, which in turn will afford many of those people who are, unfortunately, unemployed the prospect of gainful work in the future. Unlike the hon. Member for Walsall, North and the hon. Member for Liverpool, Walton (Mr. Heller), I welcome the announcement by the Government that when a man is on strike, it will be deemed that his union will pay the first £12 of benefit of that his family will receive that amount of benefit from some other source.
    That announcement has been warmly welcomed in my constituency, not just by non-unionists and employers, but by many trade unionists. I have seen some of those trade unionists today, and they believe that this measure will ensure that many more ballots are held before strike action is called for in future. I believe that the Government have acted in the best interests of the country.
    I warmly welcome the tremendous improvements in benefits for the elderly and the retired, and the increase in the mobility allowance. I welcome also the improvement made by the Government in the position of widows and widowers in the first year of bereavement.
    Though I welcome the increase in duty on cigarettes, wine, spirits, and to a limited extent on beer—I declare an interest as non-executive chairman of CAMRA (Real Ale) Investments Ltd.— I strongly oppose the increase in duty on hydrocarbon oil. I tell my party that I shall not vote with it in the Division Lobby on the increase in duty on hydrocarbon oils. That increase has a direct impact on inflation not only for the ordinary domestic consumer but for industry. Bearing in mind that oil prices have doubled in the last 12 months. I believe that the Government might have held fire for the moment, since they will get considerable income from oil in other ways.
    This has been a courageous Budget, and
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    I give the Government almost my full support. The Government have the support of the country, and I am sure that the Budget will cure the basic evils of inflation and the excessive public service borrowing, which has contributed to the inflation, that has dogged this country for far too long.
    9.10 pm
    Mr. John Horam: I was happy to give a little time to the hon. Member for Macclesfield (Mr. Winterton) because it enabled him to say that he would vote against the Government. That is the first sign of a move from the decorous revolts of the past to more serious action on the Finance Bill and other issues.
    The striking feature of the Chancellor's statement was the way in which the optimism vanished. Last year he said that he dared to hope that the people would respond to the opportunity that he was giving them. This year he said that there was no alternative to the grimmest picture that any Chancellor has presented in the post-war era. That was reflected in his tone. He made a limp and over-detailed speech. As my right hon. Friend the Leader of the Opposition said, there was no central theme.
    Budget Statements are never remembered for long. More than most Ministers, Chancellors of the Exchequer are judged by their deeds. Even Lloyd George, when he was introducing the first of his historic pre-First World War Budgets, bored the House. He spoke for four and a half hours. The present Chancellor spoke for only two hours. In the catalogue of easily forgettable speeches, yesterday's Budget Statement ranks high.
    On the surface the Chancellor was more cautious than he was last year. He gave a little here and a little there. A certain mean-minded balancing was the superficial tone of the Budget. Perhaps that indicated a greater influence by civil servants than was evident last year.
    At a deeper level the deflationary strategy was not only confirmed but strengthened. The huge gamble of monetarism was increased. That is mistaken in theory and damaging in practice. That policy is being pursued with a disregard for the poor, the disadvantaged and ordinary families. That is divisive and insensitive.

    1771
    Anyone who represents Gateshead does not find it easy at the best of times to forget the face of poverty. Poverty is being strengthened and deepened. That is the most alarming and worrying aspect of the Budget. I find it difficult to forgive the Government for that.
    There are alternatives, not only to the Government's economic strategy but to their social strategy. The Government are attempting to mislead the House and the public on the financial facts of Britain's position. I hope that the Minister will deal with the subject of revenues from the North Sea. We all read the occasional reports by Wood Mackenzie which forecast Government revenues from the North Sea. The latest indicates that the revenue would be about £15 billion by the mid-1980s. In 1983–84—the last year covered by the Red Book—the revenue from that source will be about £13 billion.
    My hon. Friends will recall that when we were in power we published a White Paper on the challenge of North Sea Oil and in it we said:
    "The Government has decided that the right course is to present an annual progress report giving details of the revenues received from North Sea oil in addition to the other sources of revenue and of the effect of their application to further the objectives of this White Paper."
    We spelt out the various alternative courses that it would be possible to pursue with that available cash asset.
    The Government have devoted merely one paragraph on page 18 of the Red Book to the whole subject of North Sea oil and the unique cash bounty that the Government and the country will receive. They have reneged on the undertakings that we gave, which they should fulfil as an obligation to us as parliamentarians. They should give the House full information about this money. The riddle is deeper than that. Wood Mackenzie predicts about £13 billion revenue from North Sea oil by 1984. If the £4 billion revenue this year is taken away from that figure, that leaves a net increase of £9 billion between now and then.
    In the sole paragraph that the Government have devoted to the subject, they say:
    "Between 1979–80 and 1983–84 the total government receipts are projected to rise by £5
    1772
    billion with the contribution from North Sea oil revenues accounting for about half of the increase."
    Adjusting slightly for the years, it appears to me that the £7 billion which will accrue to the Government is not accounted for as tax receipts. That can mean only that the Government will give the money away in tax reductions. If they were not giving it away as tax reductions, it would be included in that paragraph as an increase in revenue.
    If there is some other explanation for this huge amount of missing money, I would be interested to know what it is. I hope that the Government will enlighten us. Not only are they not giving the House proper information about the money, based on the best available estimates, but they are taking decisions already about the future disbursement of the money.
    As it is of utmost importance that we should be informed, and that the public through us should be informed, I wish for more information on that subject. It is crucial.
    In the previous Budget Statement, the Chancellor said that he was giving us an opportunity. In truth, the opportunity is his. We all know the nature of the problems that we face. We discussed them at great length in our economic and financial debates. We all wish to solve the problems. At the same time as these problems are reaching a critical stage, we have this unique asset arising from North Sea oil. The Government have an opportunity to use this money wisely to improve our social and economic position and to give the people hope that there is a strategy that will give them a glimmer of light at the end of the tunnel. They would then realise their creative energies so that the problems could be solved.
    The Government are not seizing that opportunity as they should. They are relegating the matter to one paragraph in the Red Book. That is a dereliction of their duty.
    I wish to deal with a subject with which I have long wished to deal but have never had the opportunity, namely, some of the basic assertions which spring from the Chief Secretary's mouth. I will make a deal with him: if he will cease to make such assertions, we shall cease to talk about punk monetarism. Perhaps he will feel that the deal is rather one-

    1773
    sided, but I would settle for his refusing to use one of two of his assertions.
    The first assertion contained in the White Paper of last November was that public expenditure was at the heart of our economic problems. That is not true. The size of the public sector in Britain is comparable with public sectors elsewhere. In West Germany and Austria in 1977 general expenditure as a percentage of GDP was about 44 per cent. It was about 44 per cent. in the United Kingdom. Ten years ago, the figures were roughly 38 per cent. in all three cases. The situation here is comparable with what it is elsewhere. The problem is not the size of our public sector; it is the inefficiency of our private sector. That is the issue.
    The second assertion is that at all times the solution to our inflationary problems has top priority. It may be more controversial to say that I do not believe that, and I may not always carry all my hon. Friends with me. However, I believe that any Government at any moment must pursue a balance of objectives. They cannot give total priority to one objective over all others. Indeed, the danger of giving priority to solving the problems of inflation is that it leads straight to the sort of deflation on the scale that we have today.
    If we want a better view of proper objectives in economic policy, it is right to maximise the growth in our annual GNP. That is a better objective than trying to deal with inflation per se, and it is also an objective which competitor nations have followed over the years more consistently than we have.
    The third assertion to which I object is that inflation is a matter of the money supply. If it were, by now we should have some positive statistical evidence that it was related to variations in the supply of money. There is no such positive statistical evidence. Indeed, as we know, inflation can be caused by other factors, one of which is Government action.
    Ignoring that common sense point of view sometimes leads members of the Government into the most odd positions. For example, the Secretary of State for Trade said only the other day that an increase in VAT had nothing to do with inflation. That attitude may be very pure. I do not know whether the right hon. Gen-
    1774
    tleman is one of the gang of six—[HON. MEMBERS: "He is."]—but I am sure that the Chief Secretary, with his feeling for rural people in the West Country, where he came from, knows that it is ridiculous to argue that an increase in VAT has nothing to do with inflation. It strikes ordinary people as ridiculous. It makes the Government look ridiculous. Clearly, it is palpable nonsense, especially when we know that they know that the transmission mechanism for inflation is all about expectations. Therefore, it is about time that members of the Government stopped making such wild assertions.
    The final assertion which troubles me most of all, and it comes most often from the Chief Secretary's lips—although during the debate it came from the hon. Member for Lincoln (Mr. Carlisle)—is that we must live within our means. I think that the Chief Secretary, in his speech in our penultimate economic debate last year, brought that out as one of his deepest thoughts resulting from his understanding of what he attributed as peasant wisdom.
    Mr. Biffen: We have a darn sight more wisdom than Labour Members.
    Mr. Horam: I would not agree. There is no doubt wisdom on both sides of the House, but it does not reside solely in the Treasury. The truth is that, while that may be a sensible motto on an individual level, when applied to the nation's finances it is the short way to disaster. Indeed, it was precisely that sort of conventional wisdom as applied to the economy which led to the great depression. Indeed, Lord Keynes's great contribution to economics was precisely to point out that we can live beyond our means and that we can get out of the troughs of a trade cycle precisely by living on credit for an extended period—in fact, almost indefinitely. It was his view that that was the way to balance the trade cycle which would otherwise persist.
    Therefore, it is absurd to go on peddling that point as though it were some kind of economic law when all recent economic history indicates precisely the opposite. Those who subscribe to that point of view define conservatism to the exclusion of Keynes. They define it so narrowly that they do not allow any

    1775
    intervention in the economy in order to balance the trade cycle.
    I detect—no more than that—that that alarms some Conservatives. For example, some Conservatives write newspaper articles that are not always signed. Some of them worry that the Conservative Party might be harking back to Manchester liberalism. Fortunately, the official Liberals are too sensible to follow that path. I am sorry that the Conservative Party has taken over so many Liberals that it is now addicted to notions that Liberals rejected a long time ago.
    Mr. Kenneth Carlisle: Is it possible to live beyond our means—to go bankrupt?
    Mr. Horam: It is possible to go bankrupt. It is also ridiculous to live within one's means if the Government continually cut down those means. One becomes involved in a vicious circle at the end of which lies bankruptcy. The hon. Gentleman will find that there were far more banruptcies during the great depression, when credit was restricted, then in the post-war years when credit, by definition, was continually increasing.
    If we look at America where the savings ratio is about 3 per cent.—Americans live in a sea of credit—we can see the difference between the sound position that is good for industry and the type of position to which the Government subscribe. The Government have based themselves on false nostrums. Their policy flows from them. They believe in reducing the sterling M3 and the PSBR in cash terms. They hope to squeeze inflation out of the economy in that way. The cost is appalling.
    The Government's Red Book contains a prediction of a 2½ per cent. fall in the GDP. As my right hon. Friend the Member for Leeds, East (Mr. Healey) pointed out, they are doing that at a time when the rest of Western Europe is hoping for an increase that averages 2½ per cent. We are going in the opposite direction. Perhaps the Minister would clarify two further points raised earlier by my right hon. Friend the Member for Leeds, East. First, there is an omission of any separation between public and private sector investment in the Red Book. Secondly, perhaps he would clarify the position of manufacturing production in the Red Book.
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    If GDP falls by 2½ per cent. in the course of the year, that fall will contain an increase in the oil sector. Therefore, the non-oil sector will be falling faster than 2½ per cent. That sector is divided between the commercial and retail side, and the manufacturing side. I doubt whether the commercial or retail sector is falling. Therefore, the manufacturing side will fall yet further. That fall may well be of the order of 6 per cent. or 7 per cent. That is a fantastic prospect for the manufacturing sector of that industry. It presages the de-industrialisation that has been even on the lips of Tory Members during the debate.
    The cost in unemployment terms is clear. Unemployment has increased by 150,000 in the past six months. All the forecasts suggest that it will reach about 2 million in the near future. Some forecasts make much worse predictions. It will also lead to high interest rates. The Secretary of State for Trade—as well as the Prime Minister—has been quoted as saying that interest rates will remain at the present high level for at least 18 months. I do not believe that anyone can make such an accurate prediction. However, that is generally the prospect.
    As has been pointed out, high interest rates mean a high pound, despite a strong dollar. That position is likely to persist during the year. In turn, that means high imports and a struggle for our export industries.
    If there is a victory against inflation, it will be a Pyrrhic victory. The battlefield will be littered with the slaughtered remnants of our industrial army, factories and greatness. That is the price that we shall have to pay for the course that the Government are pursuing.
    When the Government are criticised for pursuing pessimistic and almost defeatist policies, they say that there is no alternative. That is an inherently ridiculous assertion. There are always alternatives, and in this case there are a number, some of which involve radical changes. General and selective import controls have been mentioned. Certain hon. Members advocate a manipulated devaluation, and others a formal or informal incomes policy.
    Even if one sticks with the orthodoxy of the Government and does not adopt those measures, other alternatives remain.

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    First, the Government could have maintained a high level of public expenditure. Immediately Conservatives will argue that that would lead to a higher public sector borrowing requirement. The Chief Secretary will be the first to concede that that does not necessarily follow. It depends on the level of activity.
    I happened to feed through the Treasury computer the figures for a continuation of the previous Government's policies, minus £1,000 million. My hon. Friends the Members for Blackburn (Mr. Straw) and Battersea, South (Mr. Dubs) worked out the figures, which indicated that, had those policies been pursued, the PSBR would have fallen with a higher level of public spending than we have now. The PSBR will not necessarily be higher with a higher level of public spending.
    Even if the PSBR were higher as a result of a higher level of public expenditure, as the Government are aware, that is not necessarily bad. The London Business School suggested that £10 billion would be a reasonable level for the PSBR with a 2 per cent. fall in GNP. It could be higher than that for a larger fall in GNP, and therefore higher than £10 billion, given that we are anticipating a 2½ per cent. fall in GNP.
    In his January speech to the Euromarkets conference even the Financial Secretary indicated that the PSBR need not decline as a percentage of GDP in a time of recession. Even the hon. Gentleman, within his larger lunacy, shows streaks of sanity. Perhaps he is, after all, a secret "wet" or perhaps only a slight downpour.
    Even within the Treasury team there is diversity over the appropriate level for the PSBR. It could be higher and still be advantageous to the economy.
    The Government will argue that a higher PSBR will lead to high money supply figures and high interest rates. That again is not necessarily so. My right hon. Friend the Shadow Chancellor today made the point familiar to Government Members about the position during the early years of his Chancellorship.
    Even if a higher PSBR leads to a more relaxed money supply, that is no bad thing. My hon. Friend the Member for Liverpool, Walton (Mr. Heffer) and other hon. Members have followed the debates
    1778
    with Professor Milton Friedman, including that involving the Chancellor and the Shadow Chancellor, when Professor Friedman argued that the money supply could be a little more relaxed. A money supply target of 11 per cent. to 7 per cent. is inherently extremely tight when inflation is running at 19.2 per cent.
    The non-credibility of the money supply targets led to the interest rate hike in the autumn. People did not believe the Government. The Government tried to take a corner too sharply, and they fell off. That made the problem worse. The OPEC inflows that resulted from the high interest rates have added to the reserve base of the banking system and have made monetary control even more difficult. Interest rates have also led to a stronger pound. The pound will remain strong throughout the year.
    It is ridiculous to argue that high interest rates in Britain are a result of high international interest rates. If that were so, interest rates in Britain would have risen again when American interest rates went up, and they would rise further when European interest rates caught up with United States rates. I do not believe that that will happen. I believe that they will remain at their present level. The cause of the high interest rates is the unnaturally tight money control operated by the Government.
    There is a case for higher public expenditure, a higher public sector borrowing requirement, and a more relaxed approach to the money supply, leading to lower interest rates and a less strong pound. That would be preferable for our long-term economic objectives.
    In his peroration, the Chief Secretary said that the Government were pursuing a Tory policy of helping the nation and the family. As a sensitive man, he must understand that many people believe that the Government are dividing the nation. Why else would Lord Butler of Saffron Walden talk about the need for a more moral and civilised society? In his inimitably subtle way, that was a rebuke for the Government's policies. The Chief Secretary cannot deny that the Government have ignored their pledges to the family. They are increasing family poverty by their Budget proposals.
    The Chief Secretary also said that he was pursuing a Tory policy of private enterprise and sensible use of North Sea

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    oil, but he has said nothing about the sensible use of North Sea oil. I hope that the Government will be more forthcoming about the use of North Sea oil revenues. They are not doing very much for public enterprise, and it can hardly be said that they are doing anything for private enterprise.
    In making his call to the nation the Chief Secretary is likely to find that his cry will fall on deaf ears. He wants the new realism, but I believe that he is talking about the old deflation. It will not work now, as it did not work then.
    9.39 pm
    The Minister of State, Treasury (Mr. Peter Rees): We have had an interesting debate and I am sorry that the quality of the speeches has not commanded a better audience. It is surprising, when we have been told that this is the meanest, most vindictive Budget since 1931 and the most hopeless Budget since the war, that the Opposition Benches have been singularly bereft of Members, leaving aside some honourable and distinguished exceptions.
    The burden of attack has come from the Opposition, but it has not been sustained by numbers even if it has been sustained by the quality of the interventions. I apologise to the House if, in 21 minutes, I cannot do justice to all the points that were made in the interesting speeches this afternoon.
    There has been a slight contrast between the press comment on the Budget and Opposition speeches. It is not the difference between praise and blame. I have been in this House for 10 years and I know that no politician really expects praise from the Opposition, particularly for a Budget. However, the difference has been between a thoughtful, if critical, appreciation of the position of the country and what the Government are trying to do in the lifetime of this Parliament and the powerful, if slightly ritualistic, incantations which have been full of the slogans of class warfare.
    I turn now to the individual contributions. I come first to the hon. Member for Colne Valley (Mr. Wainwright) representing the views of the Liberal Party. He, with unexpected relish, forecast a U-turn in our policies. I am never quite certain in which direction a U-turn, in
    1780
    the political sense, is designed to take us, but I suspect that he feels that we shall be forced to impose, by statute, some kind of prices and incomes policy. He has not been able, and nor have others who, on other occasions, have advocated this course to explain to my satisfaction why other prices and incomes policies have failed and why their breakdown has been so painful and so expensive for this country.
    I admit at once that previous prices and incomes policies have not always emanated from the Labour Party. Indeed, the Conservative Party has flirted with them. But we have learnt from our mistakes. The only difference that the hon. Member for Colne Valley was able to advance on this occasion was that a prices and incomes policy such as he envisaged could be considered and introduced at leisure and without the pressures of inflation.
    It is not the circumstances in which the policy is introduced but the pressures to which it is subject after at least two years that one must take into account. I am not persuaded by the experience of past Administrations—I did not have the privilege to serve in any of them, I was merely a Back Bencher observing the scene critically and realistically—that, even if a prices and incomes policy were launched with the good will of the Liberal Party, the Labour Party and my right hon. and hon. Friends, and even if it were thought out carefully in time of peace, it would necessarily endure the wear and tear and the kind of pressures that would be put on it as the years rolled by.
    I wonder whether the hon. Member for Liverpool, Walton (Mr. Heffer), so admirably representing the strain in our national character epitomised on certain occasions by Jack Cade and Wat Tyler, would really lend all his moral support and intellectual acumen to a prices and incomes policy, even if it were introduced by his own party. I single out the hon. Member for Walton because he represents a special and long-established historic tradition in British public life. It is not one with which I agree on many points. Perhaps the hon. Member for Colne Valley should take the hon. Member for Walton outside, talk to him quietly and ask about the practical possibilities rather than the theoretical interests of this solution.
    Mr. Richard Wainwright: Will the Minister deal with my point about the fact that there is no Budget resolution on the profit-sharing concessions?
    Mr. Rees: That is a highly technical point and it is covered by the alteration of the Budget law resolution. I think that the hon. Member is mixing up the Provisional Collection of Taxes Act with the concept that he has in mind. It will always be open to a person to introduce a new share incentive scheme, make it retrospective to 6 April and it will then be perfectly effective for tax purposes. Therefore, the hon. Member should have no fear; provided we carry the House with us on this, his friends will be able to introduce their share incentive schemes.
    My hon. Friend the Member for Horsham and Crawley (Mr. Hordern) put forward an interesting proposal which was that the tax-free zones should be extended to all development areas. That is a charming concept. We shall obviously watch the enterprise zones with keen interest and if they are a success, there will no doubt be scope for expansion later.
    I return to the hon. Member for Walton, for whom I have great personal regard. I think that the only occasions on which we have found a common identity of view have been in debates on Church of England matters and on devolution. Alas, neither of those subjects is before the House this evening.
    The hon. Member was a little alarmist in suggesting that there would be some massive industrial confrontation in the lifetime of this Government. He emphasised—it is perfectly right—that it is not a criminal offence to go on strike. I do not think that any one of my right hon. and hon. Friends would assert that to go on strike is or should be made a criminal offence. The simple question that has agitated the country—not just members of the Conservative Party—is whether it is right to call on the general body of taxpayers to add, however indirectly, a little support to those who choose to go on strike. Whether to go on strike is a personal decision and therefore we felt that we should apply ourselves to this problem.
    The hon. Member for Walton also touched on enterprise zones and said that they might turn themselves into mini
    1782
    Hong Kongs. That would be a delightful and interesting conclusion. I have the warmest regard for the industry and enterprise of those who inhabit almost the last of our major Crown colonies.
    Mr. John Garrett: It exists mainly on child labour.
    Mr. Rees: The hon. Member for Norwich, South (Mr. Garrett) speaks of child labour. It may be that my visits have been superficial in character, but I have never observed child labour there. If it is used it is no more than the boy who does a paper round in this country. That was a slightly inaccurate intervention.
    I turn with special interest to the contribution of my hon. Friend the Member for Plymouth, Sutton (Mr. Clark) who with honourable consistency over the last four years, supported more recently by my hon. Friend the Member for Macclesfield (Mr. Winterton) and hon. Members on the Opposition Benches, has propounded the virtues of protectionism. It is interesting to find such an eloquent and articulate exponent of at least some of the theories of the Cambridge school on the Government Benches. He challenged me—I assume the challenge was issued to me—to deal more adequately than I have in the past with the arguments that I have formulated in my mind that if we were to impose a policy of protectionism we might expose ourselves to retaliation. His simple formula was that since we run a deficit in our balance of payments—at least at present—we have the leverage.
    Perhaps that is not the right approach. The truth is that one has to see what proportion of a country's GDP is exported. Then one can see the relative balance of power. On the best evidence available to me we export about 30 per cent. of our GDP, which is far more than that of the United States. Therefore, in any encounter with the United States—I gather my hon. Friend the Member for Sutton had a pleasurable encounter at the American Embassy the other day—I suspect that we would come off worst.
    I ask my hon. Friend and the House to bear in mind—I hope it will not be felt that this is a legalistic argument from one who, until 8 May, was practising at the Bar and may soon be returning to that practice—that there is a wide range

    1783
    of international agreements to which we are party, not least those of the Common Market. I know that I may not carry my hon. Friend and others with me on that but we would have to renegotiate or break those agreements if we were to impose a full-blooded protectionist policy. Therefore, I leave, I hope not too summarily, the interesting arguments my hon. Friend put forward. I hope that there will be other occasions when we can examine at greater leisure and depth the interesting and profound points that he raised.
    I turn to the contribution of the hon. Member for West Lothian (Mr. Dalyell). I apologise deeply to the hon. Gentleman for being absent from the Chamber when he spoke. However, flesh and blood cannot keep one anchored in the Chamber for a full six hours, even when a debate of such compelling interest is taking place. Had I known that he was to raise issues of such great interest, I should have forgone my refreshment.
    If an adequate note was taken for me, the hon. Gentleman asked four specific questions. First, he asked whether it is right that the staff of the Inland Revenue should be decreased. Bearing in mind the staff increases that have been made within the Department of Health and Social Security to counter fraudulent claims, is it right to diminish the number employed in the Revenue Departments when evasion is running at a figure that we do not know precisely but which was estimated by a former chairman of the Board of the Inland Revenue in evidence to a Select Committee to be about £7 billion? That is not a figure that a Treasury Minister drawn from either of the two main parties could contemplate with equanimity.
    The staff of the Inland Revenue is slightly fewer than 80,000. The staff of the Customs and Excise is about 27,000. Almost every member of the staffs of both departments is to a greater or lesser degree concerned with evasion. As a mathematical or statistical proposition, it may be presumed that if we were to recruit an additional 20,000 staff for each department we would collect more revenue. It is a matter of balance. Where is the balance to be struck? Would it be right to say to the public "We want to increase staffing within the two departments to collect a greater amount of
    1784
    revenue"? That is a matter for the House to decide. I am not complacent. It is a problem that we keep under constant review. At present I am not persuaded that we should reverse the trend that we have set in train.
    Mr. Denzil Davies: Why not?
    Mr. Rees: As I have tried to explain, there must be a limit. I am sorry if I failed to carry the right hon. Gentleman with me.
    Mr. Robert Sheldon: I understand the argument that the hon. and learned Gentleman is advancing, and I sympathise with much of it, but how does it fit in with the proposed taxation of short-term benefits, which will mean that the number of Inland Revenue staff will have to be increased considerably?
    Mr. Rees: The right hon. Gentleman may have his mind on 1982. There are deeper social implications to be considered. The right hon. Gentleman had a distinguished career as Financial Secretary. I am not conscious that he increased to a great degree the staff of the Inland Revenue to counter evasion.
    The hon. Member for West Lothian referred to the £1 billion outstanding for schedule D. It is true that there are always sums outstanding at the end of every year. The liabilities are not agreed as punctually as one would like. I remind the hon. Gentleman and the House that most of the liabilities will be carrying interest at the rate of 12 per cent., which is not deductible for tax purposes.
    Other hon. Members—
    Mr. Dalyell rose—
    Mr. Rees: No. I do not have time. The hon. Gentleman must forgive me. I have eight minutes in which to deal with an important debate and try to state the Government's position. We shall be able to return to these matters on Second Reading. I hope that the hon. Gentleman will acquit me of discourtesy if I pass on.
    The hon. Member for Walsall, North (Mr. Winnick) foresaw a general strike. He, too, tried to reinforce the plea for import controls. It is not for me to envisage the possibility of a general strike. I hope that he hon. Gentleman will forgive me if I pass on.

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    My hon. Friend the Member for Macclesfield supported the Budget in general terms. However, he expressed his reserve on and disapproval of the proposal to increase the duty on hydrocarbon oils. The increase will yield about £550 million. If my hon. Friend is minded to vote against the Government on that issue, I hope that he will consider carefully the alternatives if we did not have that source of revenue available to us.
    I must contrast the speech of the hon. Member for Gateshead, West (Mr. Horam) with the contribution of the right hon. Member for Leeds, East (Mr. Healey). Their contributions did not entirely match. The hon. Member for Gateshead, West evidently resiles from the monetarist position to which, to a degree, his right hon. Friend still adheres and which he adopted while in Government. The hon. Member was uncertain about the figure that should be advanced for public sector borrowing requirement. The right hon. Member for Leeds, East, whatever fanciful distinctions he may draw between punk monetarism and the monetarism that he adopted, undoubtedly was a monetarist for a period.
    If the House is doubtful about that point, I refer hon. Members—as my right hon. and learned Friend referred them—to the letter written to the IMF on 15 December 1976. Presumably that letter was written after due consideration. It was not thrown up in the heat of debate or under pressure from the NEC or a Labour Party conference. It was written to international bankers, who are trained to weigh words. Perhaps we do not weigh our words carefully enough in debate. However, I assume that these were the considered words of the right hon. Gentleman. In 1976, he said:
    "For this purpose an essential element of the Government's strategy will be a continual and substantial reduction over the next few years in the share of the resources required for the public sector. It is also essential to reduce the public sector borrowing requirement in order to create monetary conditions which will encourage investment and support sustained growth and control inflation."
    I could not have put it better myself. That letter was not written under pressure but after consideration over a long period. That is exactly the position of the Government. I ask those members
    1786
    of the Opposition who have reservations about this matter to say where they stand on the matter of the public sector borrowing requirement.
    The right hon. Member for Leeds, East came out quite boldly with the figure of £10 billion. Are the Opposition with him on that? In fact, that figure is only £1½ billion more than ours. In which area would the Opposition make these relaxations? If they are so concerned with the high level of interest rates, are they confident that the public sector borrowing requirement of £10 billion would lead, over a period, to the reduction of interest rates which hon. Members on both sides of the House wish to achieve?
    Mr. Denzil Davies rose—
    Mr. Rees: I shall give the right hon. Gentleman thirty seconds.
    Mr. Denzil Davies: This is a Tory Party myth. Inflation affects interest rates —not the public sector borrowing requirement.
    Mr. Rees: The right hon. Gentleman begs the essential question. If inflation affects interest rates, how is it that we act on inflation? We believe in a sustained, moderate, sensibly thought-out monetary policy that depends, to a degree, on interest rates. It also depends on our fiscal stance and on the extent of our PSBR. Therefore, it depends on the extent of our public expenditure and on the amount that we are prepared to raise by way of taxation.
    Regrettably, in the time left to me I cannot put the constructive fiscal case. However, it is right to observe that although we have been subject to the most swingeing attacks from the Opposition—this is the small change of party politics which neither the House nor the country take very seriously—there has not been a sustained critique of the Government's fiscal measures. There has been a certain wan, lack-lustre attack on our removal of the lower rate band. But that is about as far as it gets.
    If time had permitted I should have liked—as I shall, with permission, on the Second Reading of the Finance Bill—to deal with the positive and constructive

    1787
    measures. I shall deal with what the Government have done for charities, by way of an enterprise package, and what we are doing for small businesses and the self-employed—all the various causes which we have at heart but which the Labour Party so sadly neglected in the five years that it was in power. We shall have time to come to that. I shall also come to the capital tax package.
    I want to say this to the House and the country: although it may not have been appropriate to do fully what we intended to do in the area of capital taxation, if we believe in a free market economy and a capitalist system, as the Government do, we must do far more than we have been able to do this year to reduce that jungle which was created by the luxuriant mismanagement of the Labour Party. We shall return to that.
    In a singularly lack-lustre speech, the Leader of the Opposition described this as a hopeless Budget. I want to ask, hopeless for whom? Hopeless for widows, for whom a new allowance has been created? Hopeless for single-parent families, for whom the allowance has been put up? Hopeless for pensioners, whose pensions have been safeguarded against inflation? Hopeless for small investors, who are to be relieved of capital gains tax? Hopeless for small business men, who are freed from a whole range of fiscal and administrative burdens? Hopeless for charities, which will benefit from a whole range of new reliefs? Hopeless for the enterprising, who will find new scope for creating opportunities?
    Debate adjourned.—[Mr. Newton.]
    Debate to be resumed tomorrow.

    SELECT COMMITTEE ON EUROPEAN LEGISLATION, &c.
    Ordered,
    That the Standing Order of 2nd July relating to the nomination of the Select Committee on European Legislation, &c., be amended, by leaving out Mr. John Cartwright and Sir Anthony Meyer and inserting Mr. Ron Leighton and Mr. Mark Lennox-Boyd.—[Mr. Newton.]

    OLYMPIC GAMES
    Motion made, and Question proposed, That this House do now adjourn.—[Mr. Newton.]
    10 pm
    Mr. Tam Dalyell: On 19 March, as reported in column 421 of Hansard, I said that I would try to raise on the Adjournment the issue of the alternative Olympic Games. I should like to thank Mr. Speaker for giving me his personal day. The best use of time on this Adjournment is to try to establish the facts, and therefore I put to the Minister questions of which he has been given some hours' notice.
    First, has the hon. Gentleman had a second opportunity to answer the question which I put to him as reported in column 415 on 19 March? Would he name the sporting organisations which have encouraged him in an effort to find sites for alternative events which might be held in late August or early September?
    Secondly, as a member of the organising committee of the Commonwealth Games in Edinburgh and from other experience of athletics, I know perfectly well that most of the world's top athletes have absolutely full diaries and tight engagement schedules at that time of year. Are the British Government suggesting that fixtures arranged long ago ought to be abandoned? The fact is that there are 86 fixtures for August alone in Europe and 26 fixtures in September. The schedule is absolutely tight.
    Thirdly, would it not have been a matter of good sense and, indeed, good manners for the Prime Minister, before launching into great statements in the House about the Olympic Games, to have contacted the British Olympic Association to hear its views? Why did not senior Government Ministers display elementary courtesy?
    Fourthly, what discussions have taken place with the general assembly of International Sporting Federations? Incidentally, the secretary, Charles Palmer, the judoist, is British and could easily have been contacted. How can anyone think of arranging post-Olympic Games without their good will? Their good will is a precondition of any kind of serious response from athletes. Have they been contracted and, if so, was their reaction

    1789
    other than cryogenic? If they have not been contacted, why not?
    Fifthly, is it not a fact, as my right hon. Friend the Member for Birmingham, Small Heath (Mr. Howell), who alas is not well and cannot be here tonight, brought out on 19 March, that now 21 governing bodies of sport have said that they would not sanction any alternative competition and that any sportsman taking part in such a competition would exclude himself or herself from international sport? Was this considered?
    I am at liberty to read out a telegram from the General Assembly of International Sporting Federations to the British Olympic Association from Monte Carlo:
    "All the 21 Olympic Federations reacted to Thomas Keller's note of 11 March and to his telex of 13 March, and are unanimous without exception in condemning the idea of alternative games in place of the Moscow Games.
    One Federation suggested not allowing important international competitions between 1 July and 31 August. Another Federation raised the point that according to its Statutes, the withdrawal of a team means that it is forbidden to play for 30 days before the competition from which it has withdrawn.
    Some Federations do not however exclude the possibility that other international sporting events could be added to their normal calendar, to take place at a reasonable time after the Games. A large number of federations point out with indignation that this is the meddling of Government organisations in the field of international sport, and that it is important not to allow politicians to take hold of the organisation of sport, and that it is not up to the Governments to organise international sporting competitions. One federation suggests using all possible legal means to keep control and independence of our activities."
    Sixthly, when the British Olympic Association saw Lloyd Cutler he had with him two advisers and the representative of the American Embassy. Did the Minister see the same advisers? I ask him to confirm that one adviser, Mr. David Wolter, is concerned above all, in his capacity as vice-chairman, with the 1984 Los Angeles Games and that the point might well be made to Mr. Wolter that if Moscow 1980 is jeopardised there might well not be a Los Angeles 1984, because the issue is that the future of the Olympic Games as such is at risk.
    Will the Minister confirm that the other adviser, Mr. Lenski, is the self-same indi-
    1790
    vidual, operating probably on behalf of the CIA, who certainly, CIA or not, spent his time during the Mexico City Olympics going round Eastern bloc athletes trying to persuade them to defect?
    Is not the Lloyd Cutler mission basically about American policy and, more particularly, about creating an image for President Carter in his caucus politics problems and his re-election?
    Would not it now be best to announce publicly that this ludicrous idea should be dropped? Would it not also be a good plan, now that the competitors are going to Moscow, to behave with as good grace as possible and help them? In particular, the Government might encourage those companies who would have given money to resume their plans to do so. Certainly the pressure should be taken off the athletes.
    The Minister may retort that terrible things are happening in Afghanistan; what about the Afghanistan football team? I do not doubt for a moment that terrible things are happening. Terrible things happen in any civil war. People who invite armies in from outside often turn against those armies, as the British have found to their cost in Northern Ireland where much of the bitterness and the attacks on the British Army come from precisely the groups and friends of those groups who wanted the Army in in the first place. So it is in Afghanistan. Many who wanted the Russians in and eventually persuaded them to come in have now turned against them. Do not we know from our Irish experience how miserable such a situation can be?
    Elsewhere, to be precise in column 724 of Hansard of 24 January during the nuclear weapons debate, on Tuesday 29 January during the East-West relations debate and on Friday 1 February in column 1740 during the debate of the right hon. Member for Stafford and Stone (Mr. Fraser) on national service, I have argued at length the case for viewing the Russian presence in Afghanistan in terms of shades of grey.
    I would only add to that argument that I am told by Professor John Erickson, the toughest of Russia watchers, the professor of Russian studies in Edinburgh, that the decision to go in was taken after 5 April 1979 when, in Herat, 30 Russian advisers were made to eat their own testicles, were skinned alive and their heads were

    1791
    paraded through the town on pikes. Russian women were also mauled and Russian children were killed. This subject I refer to precisely in Question 3 to the Prime Minister next Thursday.
    We have to bear in mind that this is a very complex situation. Supposing that the Olympic Games had been scheduled for London in 1980, what would we have said to suggestions that because we had become embroiled in a military capacity in the bog of Ulster, the Games should not be held in Britain?
    10.10 pm
    The Minister of State, Foreign and Commonwealth Office (Mr. Douglas Hurd): I am glad that the hon. Member for West Lothian (Mr. Dalyell) has raised this subject again. I am grateful for the way in which he did so, brief and forthright, in the style that is his own.
    Before turning to the hon. Gentleman's particular questions, of which he was courteous enough to give me notice, I should like to make some remarks about the origins of the idea of an alternative games. There is clearly a certain amount of misunderstanding. I do not personally care for the phrase "alternative games", but I suppose that we are now stuck with it. I do not care for the name because it implies a rival Olympics. Much of what the hon. Gentleman said was addressed to the matter as if it was our proposal. In fact, as I think he knows, having studied what has been said, that idea has never been in our minds. It has never been in our thoughts that we could, or should, attempt to organise, or suggest the organisation, in one place of a series of games at about the same time as those that the IOC, against our wishes, has decided should be held in Moscow.
    Our idea was simpler and more modest. It stemmed from the knowledge that in advising our own athletes to boycott Moscow we were asking for and advising on a very difficult thing. It seemed to us only fair to say that if—I underline "if"—they and the organisations to which they belonged were interested, we would be ready to help forward competitions of high quality held in different parts of the world shortly after the Moscow Olympics. Having come to that thought, we found that other Governments were thinking on roughly the same lines. We began to talk together. Out of those talks came
    1792
    the meeting that I attended in Geneva last week. Out of Geneva came a set of suggestions, not decisions, which we agreed to put to and to discuss with national and international sporting organisations.
    That leads to the first question that the hon. Gentleman put. I shall not disclose the reactions of the sporting organisations with which we have discussed these ideas. To do so would mean that I was disclosing not our ideas—I am perfectly ready to discuss those—but theirs. In some cases these are fall-back plans that they have discussed with us in confidence. I would simply say in reply to the hon. Gentleman that, based on what we found before the meeting in Geneva from our preliminary contacts and since, among some sports there is at present no interest in the ideas that we have put. Among one or two, there is definite interest. Among others, there is a desire to discuss further, to keep in touch and to keep the door open. The reasons are perfectly clear.
    Most people, at the back of their minds, whatever they may say in public, are well aware that the decision of the British Olympic Association on 25 March does not close the discussion. There are far too many uncertainties still around—uncertainties that will not be cleared up for some time to come. There are uncertainties about the decisions of athletes in other countries. It may turn out to have been unwise for the British Olympic Association to rush in before most other national Olympic committees. Most other national Olympic committees are, as the British Olympic Association is aware, carefully leaving the decision open.
    At the moment, it is still possible—and I would say, according to our information, probable—that the Moscow Olympics will not be attended by athletes from a considerable number of major sporting countries. That is one set of uncertainties of which sporting organisations and competitors in some sports are very conscious. There are also uncertainties, to which the hon. Gentleman referred, about Afghanistan itself. There is more fighting in Afghanistan now than in January. The aggression is continuing. The only difference is that Western television and press are no longer there

    1793
    to tell the tale because they have been forced out.
    Incidents such as the defection of members of the Afghanistan football team yesterday and the stories of the killings which they brought with them lift for a moment the curtain which has fallen over what is happening in Afghanistan. What is happening there is not some distasteful incident at the end of December which is now receding into the past and fading from memory. That is not the position.
    What started at the end of December is continuing and the situation is, perhaps, worsening. Such stories as the Afghan footballers have been telling say something of the realities of sport and politics as opposed to the rhetoric about bridge-building that we have heard so often in recent weeks.
    If in July when the Moscow Olympics start the position in Afghanistan is much the same and is being reported, it is hard—the hon. Gentleman would find it hard—to imagine our athletes competing happily in Moscow against the background of killing and repression.
    I think that the hon. Gentleman would agree that I have not, and nor has my hon. Friend the Under-Secretary of State for the Environment with responsibility for sport, overstated the possibilities of the concept of alternative games. I have never felt any desire to gild this particular lily. We are talking about suggestions, not decisions.
    The hon. Gentleman read out a statement from Monte Carlo which seemed to imply that we are seeking to organise games. Anyone who has read what we have said would know that we accept entirely that it is not for Governments, at least in the West, to organise games.
    Whether our suggestions are taken up depends on individuals and sporting organisations. We shall shortly be comparing notes with the other Governments who were represented at Geneva to tell them how we have got on and to see how they have got on with their contacts.
    The hon. Gentleman was correct in saying that the sporting calendar is crowded. We understand that, and there is no question of our suggesting that events in that calendar should be cancelled. That is why we included, and still include, the possibility to which the hon.
    1794
    Gentleman referred of building up events which already exist, opening them to others who might not in other circumstances have taken part and making of them the widely drawn, high-quality events about which we are talking. That is one line of thought that we are pursuing.
    The main part of the hon. Gentleman's speech dealt with consultation. That is always a difficult matter, but I think he would accept that the basic decision facing the British Government was principally one of responding to the Soviet aggression. In our view, that response had to include proposals about the Moscow Olympics. That was a political judgment for the Cabinet.
    Since then, there has been the most intense discussion and correspondence with the British Olympic Association and many other organisations, national and international. I do not know how many meetings my hon. Friend and I have had—including meetings with Mr. Charles Palmer, who, as the hon. Gentleman said, is contactable and who has been contacted—but there has been intense discussion, which is continuing. Those meetings included a meeting that my right hon. Friend the Prime Minister had on 4 February with the Sports Council and with the Central Council for Physical Recreation.
    The position of international federations is more complex than the hon. Gentleman indicated. For example, a statement made in Mexico in February by the General Assembly of International Sporting Federations referred to, and came out against, a plan for rival Olympics to be held at the same time as the Moscow Games. So did a later statement by the International Amateur Athletic Federation.
    That is not, and never was, our idea, and I hope that that is now clearly understood. The truth is, and we have looked into it carefully, that the powers of the international federations vary sport by sport and rule book by rule book. Certain types of international competition require consent under the rules. Other types do not. We are well aware of that. The Economist advised strongly at the weekend that we should take no notice and should go full tilt against the international sporting hierarchy, which it believes to be overripe for reform. That

    1795
    is not what we are trying to do. We do not intend to go against, or encourage anybody else to go against, the rules of the federations. We do not intend to try to break up the international sporting hierarchy.
    I do not want to answer the hon. Gentleman's observations about personalities in the American team. He would get hot under the collar if American Congressmen made personal criticisms about and questioned those whom the British Government sent to an international meeting. That is not a sensible line of criticism.
    Mr. Dalyell: Sensible or not, I was talking of a matter of considerable curiosity. Some believe that caucus politics in the United States are involved. Lo and behold, Mr. Lloyd Cutler brings with him Mr. Lenski. The same Mr. Lenski was the operator at the Mexico Olympics and spent his time in Mexico City trying to persuade Eastern bloc athletes to defect. We may be critical of the Russians, but some of us are extremely critical of the whole United States operation and history in relation to Afghanistan and the Olympics. President Carter's efforts to be re-elected have much to do with what is happening.
    Mr. Hurd: The hon. Member does not usually venture into that type of country. He got the name of the first person he mentioned wrong. He was referring to Mr. Wolper. Mr. Lenski is United States Ambassador to Uganda. The hon. Gentleman referred to President Carter's motives. I believe that, given President Carter's strong views—which we believe to be justified—neither he nor any other American President could possibly leave the Moscow Olympics out of a response. No American President could do that at any time, given that he shares our view about Soviet aggression. We are talking about a major act of aggression, not a shade of grey. Action on the Moscow Olympics is a necessary part of a response to a major aggression.
    Sport is a branch of politics to the Soviet Union. The party activists are trained and educated in that belief. They have a contempt for the idea that sport can be separated from politics.
    Mr. Dalyell: If it is not possible for an American President to leave out sporting considerations, how is it possible for the same President to ignore the commercial operations of the Chase Manhattan Bank and 25 other banks which are going merrily on their way? How is it possible for the European Community to sell butter to the Russians? How is it possible to keep the British and American Ambassadors in Moscow?
    Mr. Hurd: Those matters were thoroughly discussed in the major debate. The hon. Gentleman knows that the presence of an ambassador does not confer a privilege or propaganda advantage. An ambassador carries out instructions, for example, on the neutrality plan for Afghanistan. To the Soviet Union, sport is a branch of politics. The Moscow Olympics will be taken by the Russians as proof that the world does not care about the aggression in Afghanistan.
    Mr. John MacKay: Might it be worth those athletes who go to the Olympic Games putting the non-politics of the games to the test by wearing "Free Orlov" T-shirts?
    Mr. Hurd: There are many intriguing ideas in this realm of country. Because the Soviet Union totally controls the output of television, it is a fairly safe guess to say that any such demonstration would be effectively concealed from the Russians in a way that a boycott could not be concealed.
    The parallel drawn with Ulster is wrong-headed. We have heard it before. Ulster is a part of this country—part of a free society—in which people's opinions are recorded from time to time in free elections and, in the case of Ulster, in referenda. It is as different as it could be from the position in Afghanistan.
    Mr. Dalyell rose—
    Mr. Hurd: I shall not give way. I am surprised that the hon. Gentleman should persist in that parallel.
    Through the coming weeks and months we shall continue quietly and firmly to record our view, which we hold very strongly indeed. It is against British interests for British athletes to compete at Moscow in present circumstances. If

    1797
    they do so, they are weakening the pressure exerted on the Soviet Union and thus undermining the efforts that we and others are making to persuade the Russians to withdraw from Afghanistan.
    I do not know whether in a free society that view will eventually prevail. The more that I am involved in the matter, the more sure I feel that it is our job to record that view and to give it when we are asked for our opinion. Never in the history of the Olympic movement has the host country actually been committing aggression at the time when the Games were held. It is a completely new position. I have never known that point mentioned or discussed in the reports that I have seen of the deliberations of the sporting bodies.
    Surely that is the real threat to the Olympic movement and to its future. In the weeks and months to come, the nature of that threat will become increasingly clear.
    10.27 pm
    Mrs. Gwyneth Dunwoody: The Minister has been careful not to answer many of the succinct questions put to him. Is he aware that it is now clear that the Government went ahead with this move without any consultation with the Olympic Committee? It was not asked for its advice. Throughout this entire episode, it has been told what it is politic for the Government to advocate and has not been asked what it believed were the sporting interests of the Olympic committee.
    If the Minister seriously believes that it is possible to make this attack on politics by using sportsmen, he should demonstrate clearly that the Government take the same attitude to business contacts, that they do not encourage business men to trade with the Soviet Union, that they are not in favour of the opening of the Chase Manhattan Bank and that they themselves are prepared to back up their rhetoric with any sort of attack that will concern the Government. It has been plain throughout the whole of these incidents that always there has been the suggestion that the Government were giving instructions to other people to carry the
    1798
    brunt of the political fight while they were prepared only to stand on the sidelines. They have encouraged some gestures, such as that by BUPA, which can be interpreted only as very petty. It withdrew from the athletes facilities that had been offered to them.
    The House has a right to know rather more than the Minister has been prepared to tell us in terms of hard fact. It is not enough to say "Of course, we are advocating this. It is not an alternative Olympics, but we hope that there will be some other sort of demonstration". Yet the Government are not prepared to detail the countries involved, the Olympic committees that have given support or even the individual sportsmen who have been prepared to support this line of attack. They have operated on the basis of "We have to protect the sportsmen's interests by keeping the details secret until the moment comes when their names are made public." That is not good enough.
    If there were a serious attempt to do something about the Olympics, the Government should have remembered that in the first instance many of us had reservations about Moscow as a site. When there were arguments about whether the rights of individual Russians were being sufficiently protected, the Government had nothing to say. They were not interested until it became a question of their own political stance. They have never, at any time, demonstrated that they have taken the advice of the people most concerned, namely, the athletics associations involved. The Minister has demonstrated yet again that the Government do not have a case and that they do not have good evidence to prove that people support them.
    Mr. Dalyell: The Minister said that normally I do not become involved in personalities—nor do I. But Mr. Lenski—
    The Question having been proposed at Ten o'clock and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
    Adjourned at half-past Ten o'clock.