§ 4.7 pm
§ The Minister of State, Treasury (Mr. John Wakeham)
I beg to move amendment No. 1, in page 1, line 5, leave out 'In' and insert'Subject to subsections (1A) and (2) below, in'.
§ The Chairman of Ways and Means (Mr. Bernard Weatherill)
With this it will be convenient to take the following amendments:
Government amendment No. 2.
Amendment (a) to Government amendment No. 2, at end to add'other than contributions payable in respect of direct works departments of local authorities'.Government amendment No. 3.
§ Mr. Wakeham
Government amendment No. 1 amends the first clause of a short Bill that we debated recently. Perhaps I may summarise its objectives quickly. It provides for a further reduction in the national insurance surcharge to a rate of 1½ per cent. from April 1983. It also provides for the national insurance surcharge payable in the current year, 1982–83, to be reduced by an amount equivalent to approximately ½ per cent. Although it is a short Bill, its benefits are widespread.
The amendment makes local authorities and some related bodies that are financed partly through the rate support grant liable to pay national insurance surcharge at 2½ per cent. in 1983–84. Subsequently, local authorities must pay the rates applicable to other employers of 1½ per cent. The reduction will be taken into account when settling the rate support grant. The other amendments are consequential. Amendment (a) will be moved by the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) and I shall not speak to it until after the right hon. Gentleman has spoken.
During the debate on Second Reading I explained the reason for the amendment. The Government intend that the changes in the national insurance surcharge should be neutral in their effect on the financing of public sector bodies, leaving them neither better nor worse off than before the change. For central Government and nationalised industries this result will be achieved by reducing their cash limits and external financing limits both for 1982–83 and for 1983–84. We have made no secret of the fact that the purpose of the Bill is to help the private sector.
The effects of the overall action, including the clawback from the public sector, will be to concentrate the benefits of a considerable reduction in the costs of employing labour on the productive private sector. The benefits will be considerable—about £1 billion in 1982–83 and £1½ billion in 1983–84—as a result both of this Bill and 990 of the reduction introduced by my right hon. and learned Friend the Chancellor of the Exchequer in the previous measure.
The precise effects will depend upon how employers choose to use this opportunity. Many employers in domestic markets may choose to pass it on in lower prices. This will benefit consumers and in turn lead to a higher level of consumer demand and more orders for industry. Employers will retain part or all of the benefit and, as a result, they are likely to increase their expenditure, particularly on stock building and employment. Overall, the benefits can be expected to be seen in higher output in employment and in improvement in company profitability.
Local authorities will continue to pay at 3½ per cent. for 1982–83, as happened when the rate was reduced earlier this year. We had originally intended that they should pay at 1½ per cent. for 1983–84 and that the provisional 1983–84 rate support grant settlement, which was based on a 2½ per cent. rate, should be recalculated accordingly. After further consideration and consultation with local authority associations we decided that, rather than disturb those calculations at this late date and to ensure equitable treatment for all local authorities, it would be better to leave the present rate support grant calculations as they stand and to provide for the local authorities to pay for 1983–84 only at a rate of 2½ per cent. This procedure will be identical to that adopted earlier in the year when the rate was reduced.
The effect of the Bill and the amendments under discussion is that local authorities collectively and individually will be neither better nor worse off as a result of the changes in the surcharge.
§ Mr. Robert Sheldon (Ashton-under-Lyne)
I should like to refer to amendment (a) to amendment No. 2, standing in my name on the Order Paper.
The Bill introduces a further reduction in the national insurance surcharge from 2½ per cent. to 1½ per cent. from 1983. We note that the national insurance surcharge will be applied differently to local authorities and public industry than to private industry. My amendment deals with the direct labour organisations.
It is right to examine the way in which the nationalised industries are being treated. The Minister of State, Treasury, in moving the amendment, said that the purpose of the Bill is to help the private sector and to help the "productive private sector". He will be aware that many areas within the nationalised industries are productive. A number of such areas compete with the private sector.
The differentiation within the productive sector between private and public appears to us iniquitous. We deplore the way the measure has been devised.
If the Government had accepted the original amendment that we moved on 5 May 1982 this tedious Committee stage debate would have been unnecessary. Had the Government accepted the amendment then, or even the year before on 14 July 1981, we would have saved much time and the Bill would have been unnecessary.
My amendment deals with the direct labour organisations. At present, they have a 1 per cent. disadvantage. I understand that in 1983 and 1984, the disadvantage will disappear within the totality of the rate support grant. We do not know at this stage—I suppose 991 that not even the Minister of State knows at this stage—how that will be taken into account. Therefore, we cannot discuss the matter in detail, but we can make one or two assumptions.
The disadvantage for 1983–84 will amount to 1 per cent.—as it is now—between the direct labour organisations and those private construction industries that may be tendering for precisely the same type of work. Between January and March 1983 the disadvantage, as a result of clause 1, will increase to 2 per cent. If the national insurance surcharge is abolished in the next Budget without any rate support grant offset, the disadvantage will increase to 2½ per cent. I am discussing not theoretical matters but the tendering by direct labour organisations for precisely the same type of work as outside construction firms, when their premises may be within a few hundred yards of each other. Between January and March the former will be at a 2 per cent. disadvantage. We see no justification for that.
The Minister of State will have seen representations that we have received from the Association of Metropolitan Authorities. It makes the strong point about the unfairness of the disadvantage. It cannot be right that as a result of this measure one tenderer is put at a disadvantage. We have received a further note from the Association of Metropolitan Authorities—I understand that the Minister has also received it. The association has not had time to consider all the detail, but it has hinted at what it envisages will be further disadvantages.
I should like to quote from a letter from Mr. Martin Pilgrim on behalf of the Association of Metropolitan Authorities. It says:For the whole of 1983–84 local authorities will be paying MS at 2½ per cent. The private sector—with whom DLOs must compete—will be paying 1½ per cent. This extra cost directly depresses the rate of return achieved by the DLO, but the problem goes further than this. DLOs will lose tenders by the amount of the NIS differential. For example"—Mr. Pilgrim then gives some of the information which has come to light.
We can understand that at this early stage there will not be much information, but it will be made available both to the councils concerned and to the Ministers involved over the period up to the next Budget. We shall be even better equipped to continue this confrontation with the Minister in the months ahead than we are now.
The Association of Metropolitan Authorities has had only a short time to consider the matter. Mr. Pilgrim's letter continues:Two recent cases reported to the Association involve tenders of over £0.5m which were lost by the impact of the present NIS disadvantage since August 1982. If DLOs lose contracts their total viability is threatened. DLOs can operate in a competitive environment but only if that competition is fair. A 1 per cent. NIS differential is not fair competition.As the Minister knows, the organisations are under an obligation to compete fairly. It is wrong to place them under a burden and then directly to give the private sector a head start. No one can reasonably object to fair competition, but unfair competition as a consequence of Government legislation is clearly and transparently wrong. I hope that the Minister will make inquiries to discover what is happening to contracts that will go out to tender over the next few months and seek a proper remedy in the next Budget.
992 We welcome the national insurance surcharge reduction. It is a pity that the Government did not respond to our earlier demands for a reduction. We shall be pressing them for a further reduction. I may have some further comments to make when the Minister has replied to the issues that I have raised. It may be necessary to debate whether the clause should stand part of the Bill, but that will depend on the Minister's reply.
§ Mr. Wakeham
The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) asked whether the nationalised industries were being penalised. It is the Government's view that they are not. They will pay the same rate of surcharge as the private sector. The adjustment to their external financing limits is made to leave the industries' underlying financial position unchanged. The limits reflect the Government's assessment of the industries' need for external finance. As the national insurance surcharge cut will increase the industries'internal resources, their need for external resources is correspondingly reduced. It is right that we should reduce the external financing limits. It does not follow that the industries will necessarily be placed at a competitive disadvantage.
If a private sector firm uses the benefit of the surcharge reduction to reduce its borrowing, and a nationalised industry does the same, they are in precisely the same position. If a nationalised industry has a substantial change in its competitive position, for whatever reason, the Government can make an appropriate change in its external financing limit. It would be a major and unacceptable change in the control exercised by the Government over nationalised industries for the Government to operate in any other way. Nationalised industries are controlled by external financing limits that are settled between them and the Government. It cannot be logical for there to be a change of this sort in the circumstances of a nationalised industry without the Government considering the EFLs.
If the change had been the other way around, the nationalised industries would have been looking to the Government and suggesting that the EFLs should be adjusted. I do not accept the right hon. Gentleman's charge in respect of nationalised industries.
The effect of the Government's amendment is to make local authorities liable to the national insurance surcharge at 2½ per cent. in 1983–84 for all their employees, including those in direct labour organisations. The amendment seeks to reduce the rate for employees in direct labour organisations. The amendment is defective in a substantial way. There is no definition of a direct works department either in the Bill or in any other legislation. Furthermore, no provision is made for employees who work partly in direct works and partly elsewhere.
I make no criticism of the right hon. Gentleman for not being able to frame a watertight amendment, because we do not see how the difficulties can be overcome. There is no such thing as a direct labour organisation in law that is in any way analogous to a private building or engineering contracting company. A direct labour organisation in law is an organisation that is part of the parent authority, and it has no independent legal personality. That is why it is impossible to separate something called a direct labour organisation from the rest of a local authority and to treat it as a independent entity, which it is not. Nor is there a standard direct labour organisation in the sense of a particular type of direct works organisation. 993 Some councils may choose to organise their direct labour work under one unitary organisation covering highways, building and other work. Others may form separate organisations for building, highways and other work. Others may prefer to attach a small direct works group to various service functions such as housing and recreation.
§ Mr. Robert Sheldon
Is the Minister saying that he is not granting a reduction in the national insurance surcharge to direct labour organisations because of the difficulties of defining them?
§ Mr. Wakeham
No, that is not the reason. I am explaining why there is extreme difficulty in doing what the right hon. Gentleman seeks to do, even if he can persuade me that it is the right thing to do. I shall not rest my case on the legal difficulties, substantial though they are. We can see no practical way of achieving what the right hon. Gentleman wants.
Part III of the Local Government, Planning and Land Act 1980 says nothing about a direct labour organisation as an organisational entity. The term "direct labour organisation" appears only in the title of part III, which merely defines types of work such as construction or maintenance work and building or engineering work covering areas such as housing, highways and sewerage works. The legislation applies to all authorities which carry out such work by using their own employees, except for local authorities with small direct labour organisations which employed 30 or fewer persons wholly or partly on construction and maintenance work in the previous financial year.
There is no alternative to tying the legislation to a definition of types of work. It is especially difficult to attach exemptions or special requirements to a direct labour organisation as an entity, because such an entity does not exist. For example, some small council employees spend some of their time on construction and maintenance work and some on activities that are outside the scope of a direct labour organisation. There is no logic in trying to exempt these people from a higher national insurance surcharge when many may spend most of their time working on activities that are outside the legislative requirement of compulsory competition with contractors. Issues such as the higher national insurance surcharge are best tackled by ministerial assurances, and the Department of the Environment has already—
§ Mr. D. N. Campbell-Savours (Workington)
It has been brought to my attention that the Liverpool local authority has found a way round the problem by setting up a separate company. Are there not available variables in the form of DLO arrangements which the Minister could use if it were the Government's intention to ensure that local authorities obtained the benefit of the national insurance surcharge reduction?
§ Mr. Wakeham
I am glad that I did not say that it was impossible to act. I said that it would be very difficult. The Government would be unable to define such an exemption for direct labour organisations. I have made it clear that I am not resting my case on the definition, although that point is of some substance.
§ Mr. Wakeham
I do not think that I have. The most that the hon. Gentleman can say is that Liverpool—and in particular Merseyside—is in a different position from most of the other direct labour organisations in the country.
Mr. Eric Heifer (Liverpool, Walton)
I was the chairman of the direct works department. An organisation was established within the corporation. It acted as a company and we endeavoured to keep the finances of the two bodies as separate as possible. There were certain ties from which we were unable to escape, but I fear that when the Conservatives took control of Liverpool they destroyed our efforts.
§ Mr. Wakeham
It is not sensible for me to argue about the affairs of Liverpool even if, as I suspect, the duly elected members of the authority at the time were likely to agree with my view as the desirable way forward.
The substance of the debate is the way in which direct labour organisations are treated by the Government, and not the initial point, which concerns the technical definition.
The competitive position of direct labour organisations compared with the private sector is a matter not for me but for my right hon. Friend the Secretary of State for the Environment. I know that he is having discussions with local authorities, and they have been told that in considering the rate of return achieved by local authorities Ministers will, in 1983–84, as in the current financial year, be prepared to accept explanatory notes concerning direct labour organisation revenue accounts which identify and quantify the effects of higher national insurance surcharges as agreed with the authorities' auditors. Correspondence and discussions are continuing with the local authorities to deal with this matter.
From information that I have received, I know that local authorities are coping reasonably well with the situation. There are problems and difficulties with some local authorities. These are exactly the points that should be the subject of discussion. My right hon. Friend will have to consider these explanations in looking at the accounts of direct labour organisations. I am sure that they will not be judged unfairly. I feel sure that he will take into account these factors, along with all the others, in making a judgment.
§ Mr. John Horam (Gateshead, West)
How can explanations overcome the fundamental commercial fact of direct labour organisations replacing higher costs as a result of Government measures? That is the principle about which we are concerned. The Government should ensure that competition is on a fair basis. It seems extraordinary that some bureaucratic piece of bumf or explanation can override that fundamental fact.
§ Mr. Wakeham
I take that point, and it is to deal with it that these discussions are taking place. The Government recognise that some direct labour organisations will be put at a disadvantage. There are many other factors to be taken into account. That is why these items are to be shown in the accounts.
§ Mr. Robert Sheldon
The Minister will be aware that at the moment a number of tender documents are being prepared by direct labour organisations to cover the period when the national insurance surcharge will be reduced for their competitors, but not for them. What will he tell those people? It is all very well to ask for the explanatory 995 memoranda some time next year, but they should be supplied now, when the documents are being sent out. These decisions will be made long before these explanatory memoranda are even devised, let alone accepted by the Treasury.
§ Mr. Wakeham
That is understood by my right hon. Friend the Secretary of State for the Environment. He is having discussions with the local authorities to establish the best way forward. I have no doubt that the right way forward is to carry on with the discussions. It would be unreasonable to anticipate the results of those discussions. I am certain that my right hon. Friend is listening and talking in a sympathetic fashion to try to find a solution to the problem that arises under the existing legislation.
§ Mr. Campbell-Savours
Would it be in order for the Minister to give an undertaking today that there will be adjustments to the rate support grant to compensate local authorities for the losses derived from uncompetitive tendering?
§ Mr. Wakeham
Certainly not. The Government have made it clear that the purpose of this relief is to give additional relief to the private sector. If we reduce the relief to the private sector because we give additional relief to the public sector, even if the unsatisfactory nature of definitions could be overcome, that would reduce the relief to the private sector.
§ Mr. Heffer
On the basis of what has been said, is it not clear that this is sheer political prejudice?
§ Mr. Wakeham
The hon. Gentleman misunderstands the position. The amendment fails to deal with the problem. To suggest that the problem is one of sheer political prejudice is substantially to understate the nature of the problem. The Government are giving relief to the private sector, but do not intend to give relief to the public sector. They intend to leave the public sector in the same position as it was before—neither advantaged nor disadvantaged. We recognise that where direct labour organisations are in competition with private companies, local authorities envisage a problem. They are in discussion with my right hon. Friend and I very much hope that a satisfactory solution can be worked out.
§ Mr. Campbell-Savours
In dealing with the European Coal and Steel Community, the Community has set the objective of removing national aid to create conditions of free and fair competition. Does the Minister not accept as a result of this measure he may well be offending the spirit, if not the letter, of some obscure European directive, which up to the present time has not been brought before the House? Can he give an assurance that that is not the case? If it is, he should return with a new measure to reverse what is proposed.
§ Mr. Wakeham
I am sure that the hon. Gentleman is the greatest expert in obscure pieces of legislation concerning the European treaties. I do not think that I am in a position to answer a hypothetical question.
§ Mr. Robert Sheldon
The hon. Gentleman's replies have been far from satisfactory. There is no need for these complicated explanatory notes. All that needs to be said is that there are hundreds, or perhaps thousands, of people in direct labour organisations who are paying an unfair and 996 unequal rate of national insurance surcharge, which puts them at a disadvantage against the private sector, because of the Government's predilection for private initiative as opposed to excellent, worthy and sustained public initiative.
That is what it is all about. The long discussions about how the accountants will agree to the footnotes at the bottom of the accounts are unnecessary, because those footnotes merely need to state the number of direct works organisation employees at so much per head.
I fail to see the necessity for these lengthy discussions. The Minister can surely say now that my version of what the explanatory notes should say will be accepted by the Government. If so, we shall be happy to leave the matter there.
§ Mr. Wakeham
I do not think that I can say any more than was said in the letter that my right hon. Friend the Minister for Local Government and Environmental Services sent to the local authorities. He said that he would be prepared to accept explanatory notes to these accounts, and he has told me that he will take them into consideration. He is confident that local authorities will not be unfairly judged as a result. It is neither possible nor right to go any further than that, except to hope that there will be a satisfactory conclusion to the discussions.
§ Mr. Robert Sheldon
The Minister is courteous, listens to what is said and tries to find a solution. I am sorry that he is unable to accept my suggestion, which is the most obvious, simplest and clearest way of giving information so that those who tender from tomorrow morning will be able to do so on the correct basis.
I am not sure why the Minister is unable to accept that suggestion, because his remarks came close to doing so. At any rate, will he accept it for the period January to March, when direct works organisations will be at a great disadvantage? During that period the tenders that are now in preparation will be put out to offer. By accepting this further suggestion the minds of the tenderers will be put at rest, because they will know that, at least for some of these contracts, the explanations need refer only to the extra national insurance surcharge paid by direct labour organisations in excess of what is paid by private firms.
§ Mr. Wakeham
Persuasive as the right hon. Gentleman is, I cannot be drawn any further, but I shall ensure that the attention of my right hon. Friend is drawn to his remarks. The discussions with the local authorities will take place with all possible speed, and those are just the sorts of points that will be taken into account.
Amendment proposed to the proposed amendment: (a), at end add
'other than contributions payable in respect of direct works departments of local authorities'.—[Mr. Robert Sheldon.]
§ Question, That the amendment be made, put and negatived.
§ Amendment No. 2 agreed to.
Amendment made: No. 3, in page 1, line 9, leave out 'Subsection (1) above has' and insert
'Subsections (1) and (1A) above have'.—[Mr. Wakeham.]
§ Mr. Wakeham
I beg to move amendment No. 4, in page 1, line 13, leave out from 'paid' to 'the' in line 14 and insert'in the tax year 1982–83'.
§ Mr. Wakeham
These amendments would allow every employer liable to national insurance surcharge for 1982–83 to have the benefit of the reduction for that year. As the Bill is drafted, eligibility for this reduction is confined to those employers liable to the surcharge for the period 4 January to 5 April 1983. Amendment No. 5 is a consequential drafting amendment.
As I explained on Second Reading, the reduction was confined in this way to serve the aim of giving the additional help to going concerns, but on further consideration we decided that in certain cases this provision would be too harsh in its impact. For example, where a business continued but there was a change of employer during 1982, the old employer would not qualify for any relief and the new employer could claim relief only on those payments that he had made in the year. There might also be cases where no liability to surcharge arose for the qualifying period of 4 January to 5 April—for example, with a seasonal business. To avoid any risk of withholding the full benefit from deserving cases, we have decided that the simplest and most practical approach is to extend the qualifying period in clause 1(3) so that anyone who paid national insurance surcharge in 1982–83 would qualify for the relief.
That is the effect of the amendments. I cannot put a figure on the cost of this change, but it will be small and will not alter the estimate of £350 million as the cost of the relief in 1982–83.
§ Mr. Robert Sheldon
The Opposition have nothing against the amendments, but it is reasonable to refer to the complications that are unnecessarily involved in these changes, especially when the matter could have been dealt with satisfactorily in the Finance Act at the time of the Budget.
There are a number of cases where employers change, and, sadly, under the present Government, many firms also go into receivership. That is something that we shall have to look at because of the increasing numbers involved. It is sad that we must make such provisions, but I understand the need for them, and accept them.
§ Question put and agreed to.
§ Amendment made: No. 5, in page 1, line 16, leave out 'the tax year 1982–83' and insert 'that tax year'.—[Mr. Wakeham.]
§ Clause 1, as amended, ordered to stand part of the Bill.
§ Clause 2 ordered to stand part of the Bill.
§ Schedule agreed to.
§ Bill reported, with amendments.4.50 pm
§ Mr. Wakeham
I beg to move, That the Bill be now read the Third time.
I have no hesitation in commending the Bill to the House. Although it is short, the benefits that will flow from it will be great. The national insurance surcharge is and has always been an unpopular tax because it is a bad tax. It is a tax on jobs and was introduced by the previous Labour Government. They felt that it was necessary when their economic policy was in ruins. We opposed the surcharge when it was introduced and we still do.
When we came into office, the rate of surcharge was 3½ per cent. In the Finance Act 1982, we cut the rate to 998 2½ per cent. The Bill will cut it again, to 1½ per cent. Together, the two measures will reduce the costs of employing labour in the private sector by about £1½ billion in a full year. We have cut the rate of surcharge by as much as is considered prudent.
The substantial benefits of the cuts depend on their being made within a reasonably acceptable financial framework that ensures that the broad thrust of the Government's economic strategy is maintained. That is the only way to produce sound growth and real jobs. It is a long, hard struggle to clear up many of the problems in the British economy but we are slowly succeeding.
The Opposition have said that they would have abolished the surcharge. It is easy to say that. One should examine their record. They introduced the surcharge at a rate of 2 per cent. and subsequently increased it to 3½ per cent. The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) says that he was reluctant, but the fact remains that he was a member of the Government that introduced it.
The Opposition have not suggested any ways of making up the lost revenue if the surcharge were abolished. That is not surprising as they are a borrowing party. They would go on borrowing and printing money while inflation sky-rocketed and the economy collapsed. I have no doubt that before long they would be knocking at the IMF's door, asking for more assistance.
The Bill is an integral part of our economic strategy. It will provide real benefit to industry and commerce. The House will know that the first benefits under the special reduction in surcharge for 1982–83 are due in February. I am most grateful for the help that we have received for the speedy passage of the Bill so that the benefits should not be delayed.
§ Mr. Robert Sheldon
The Minister of State referred to the way in which the national insurance surcharge was introduced in April 1977 and increased in October 1978. He will be aware that unemployment has increased by 2 million since then. He must also be aware that a change of such magnitude means that economic policies must now be examined in a slightly different way. We believe that it is necessary to reduce the surcharge because unemployment has increased and production fallen catastrophically.
The Minister is quite right to say that we intend to increase borrowing. That is prudent when there is so much under-utilisation of capacity. The surcharge is quite separate from the employer's contribution to the national insurance fund. It is now a tax that must be removed as soon as possible. It reduces the competitiveness of British industry in world markets and worsens the balance of payments because it is a charge on exports, not imports. It is especially damaging in the present circumstances. It is a labour cost which, at a time of incredibly serious unemployment, is of special importance. It is a tax on the jobs that we now need in large numbers. It reduces employment by making it more expensive for employers to take on new labour.
The national insurance surcharge was introduced as a temporary expedient. It was introduced in 1977 but the Government have kept it in force much longer than the Labour Government envisaged. It allowed the 999 Government of the day to raise revenue that was then needed, but in the light of reduced output it is no longer required.
It is essential that a large proportion of the direct benefits of the cut go directly to those industries that need them most. Manufacturing industry pays about half of the tax that is collected by the surcharge and the bulk of the remainder is paid by the construction industry which is also affected by the slump in investment.
The direct benefits of the cut will be reduced in many cases because the businesses concerned will pass them on to workers in the form of higher wages or to consumers in the form of lower prices. As the CBI has stated clearly, all that will depend on the state of the economy—and that will vary from one business to another. The CBI does not believe that a reduction in the national insurance surcharge will lead to a general increase in wage claims. Still less does it believe that there will be immediate increases in the rates that are negotiated. The CBI made that point and we thought that the Government would listen to it. I thought, therefore, that the Government might accept it.
Businesses vary greatly in their ability to reduce prices in response to a reduction in national insurance surcharge. At one extreme, many of those businesses that bear the brunt of international competition at home or in the export market have no freedom to charge anything other than the world market price. In those cases, the reduction in the surcharge and, most important, the further reduction that we look forward to in next year's Budget, will have its full effect on the profitability of the business and none on prices. At the other extreme, some businesses might pass on most of the benefit of the reduction in the form of lower price increases.
We must take those factors into account. That is why the Opposition believe that the abolition of the surcharge would be the best tax measure for the Government to take. That is in line with what the CBI says. We have constantly returned to this subject as it is the most important single measure that could help industry. We attach great importance to it. The Budget earlier this year was to have been a Budget to help jobs and industry. It has helped neither. That is why further action will be required.
§ Mr. Horam
As the Minister said, the national insurance surcharge is a bad tax. It was introduced by the previous Labour Government and it has done no good.
The Minister will be aware that the burden of the complaint against the Government is that they could have gone much further than this niggardly reduction. That is not merely the view of the Social Democratic Party, the Liberal Party and the Labour Party; it is shared by Constrvative Members such as the right hon. Member for Chesham and Amersham (Sir I. Gilmour) and the hon. Member for Bath (Mr. Patten). Moreover, industry, the CBI, chambers of commerce and everyone else who has a direct stake in and has his finger on the pulse of industry, 1000 has gained the impression from the Government's niggardly approach that they pay more attention to interests in the City of London than to industry, commerce and business in the provinces of Britain.
The Government have forgone the opportunity to begin the controlled reflation most recently called for by the president of the World Bank. The unemployed and small and large business men will all pay the price for the Government's lack of foresight.
A second reason why the Government should have taken the opportunity to go further than they have in the Bill has emerged most clearly in the past week or so. It is the international dimension. If the Government maintain the severity of the financial squeeze that they have imposed over the past few years, the ability of Third world countries to repay their indebtedness will be affected. That in turn contributes to the worrying financial instability in all parts of the world. The Chancellor himself cannot be here today because he is taking part in some allegedly secret meeting of the Group of Five and the rest to discuss these very problems, which would be aided by some controlled reflation.
Moreover, as Third world countries are impoverished by their indebtedness, which is increased by the actions of the developed world, they are less able to purchase goods from this country. They cannot afford to buy many of our industrial and commercial products and services because they are hindered by the regressive policies of major developed countries. Therefore, we are simply cutting off our nose to spite our face.
As feeling grows throughout the world that we should consider in a more far-sighted way how to control and develop the world economy with a view to getting expansion back into world trade, we should take a less narrowly self-interested view than that adopted by the Government. The day will come when the narrowly restrictive policies pursued by the British Government in the past few years and by President Reagan over a similar period are seen to be extraordinarily damaging to the international economic climate on which we all ultimately depend for the success of our trade and industry. No country is more dependent on this than the United Kingdom, with 30 per cent. of total goods in exports and imports. Countries such as the United States, where only 4 per cent. of the total is represented by exports and imports, can afford to live in a protectionist world with an international climate as gloomy as it now is, but this country cannot. I therefore regret that the Government have not seen the international purpose as well as the narrowly domestic purpose in going further than they have in this case.
As the right hon. Member for Ashon-under-Lyne (Mr. Shelon) said, there is no doubt that we shall return to this time and again until it is proved yet again that the Government simply cannot see the broad picture in its full amplitude.
§ Question put and agreed to.
§ Bill accordingly read the Third time and passed.