§
Motion made, and Question proposed,
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—
§ Relevant European Community documents: Document No. 10077/81 and the annual report on the economic situation in the Community (1981) and the economic policy guidelines for 1982.]
5.35 pm§ Mr. Michael Foot (Ebbw Vale)After the introduction of the Budget Statement, it is the custom for the speaker from the Opposition Front Bench, to offer congratulations to the Chancellor of the Exchequer on the manner in which he has delivered his speech, whatever may be thought of its content. As I said on a previous occasion, when I had the chance of performing that function, I have followed the career of the right hon. and learned Gentleman through many years. I know well that when he wishes to make himself clear, he is perfectly capable of doing so. When he wishes to make himself obscure, he is perfectly able to do so. In his speech he showed a nice discrimination in those matters because he hurried over the monetary and economic strategy of the Government. He was wise to so.
I am happy to extend to the right hon. and learned Gentleman the customary and not exaggerated congratulations that are made on such an occasion. However, the right hon. and learned Gentleman skilfully managed to mislead some of his followers, who have now taken the precaution of leaving the Chamber. I understand their feelings. He achieved that because he managed to conceal the major assumptions on which he was acting under a series of minor excursions. That was the key to his success. However, he injured that position when he said that he was continuing the policies that he had introduced in previous Budgets. Those policies have so sorely contributed to our present situation.
I shall give one or two hasty examples, referring to what the right hon. and learned Gentleman said in the latter part of his speech. For example, he said that he would continue to assist the construction industry. He outlined a number of measures that we hope will assist it. However, if he assists the construction industry in the same way as last year, there will be a further catastrophe. Last year he said that he would assist the construction industry, and there was approximately a 12 per cent. fall in construction.
A whole series of measures was announced by the Chancellor of the Exchequer to try to close the loopholes 759 in the way in which international business is conducted and might be defrauding the Exchequer, or at least injuring the revenues of the Exchequer. However, if the right hon. and learned Gentleman had not abolished exchange controls, he would not have had such difficulties and would not have to carry out a whole series of operations.
The right hon. and learned Gentleman said that what he wanted was justice for the Exchequer. The more we examine the Budget, as well as his previous Budgets, the more we shall discover and conclude that what is wanted is not justice for the Chancellor of the Exchequer, but mercy. That is what he does not deserve.
We fully acknowledge that the right hon. and learned Gentleman has a difficulty. He must steer his way between the prejudices of the Prime Minister, and the prejudices of the Prime Minister. That is a difficult course to steer. Her mood changes too. Sometimes she is her gay, exhilarating, galvanising self and the next moment, she may be plunged into inspissated Pymism. If anyone wants to know what that means, they can take a look at the right hon. and learned Gentleman now. Inspissated Pymism means a general feeling that "we can't do much about it boys, we'll have to put up with her for another period, there's no chance of doing anything until after the general election, let us just grin and bear it even if we cannot understand what the Chancellor of the Exchequer has to say." I am glad to see that the right hon. and learned Gentleman has cheered up and joined in the proceedings. I welcome that.
The right hon. and learned Gentleman has not by any means dealt with the major concerns that face the country. The first major defect of the Budget, despite the references of the right hon. and learned Gentleman to the question of unemployment at the beginning, is that it shows no proper understanding of the scale of the catastrophe that has befallen our country and people. At the beginning of his remarks on unemployment, the right hon. and learned Gentleman referred to the latest scheme that he has devised. I do not know what the scheme is called, but it seems to come from the Department of Employment. That does not recommend it to us, as the Department is under the auspices of the right hon. Member for Chingford (Mr. Tebbit).
That scheme looks a pretty miserable, squalid affair, cooked up at the last moment. We shall, of course, examine it carefully, but it would have been much better had the right hon. and learned Gentleman accepted in full the proposals of the Manpower Services Commission. The MSC knows much more about these matters than the Secretary of State for Employment. The chairman of the MSC should have been left in his job to carry on his work. The right hon. and learned Gentleman should have been seeking the means whereby we could sustain the work of the MSC. The scheme outlined by the right hon. and learned Gentleman, like some of the other schemes outlined by the Secretary of State for Employment, so far from assisting us will only injure existing schemes.
In the past three years the Government have done immense damage to the whole scheme for training in this country. The number of apprentices is lower than it has ever been in our history. That is a further example of the way in which the Government have sought schemes to present to the House, but at the same time undermined the real schemes that industry requires. I fear that the same 760 judgments will be applied to the right hon. Gentleman's proposals today.
The major defect of the Government's proposals in the Budget—and the right hon. and learned Gentleman includes the condemnation that what he does in this Budget is a continuation of what he was doing before—is that it takes no account of the huge total of unemployment. In February of this year, there were 3,044,878 people registered as unemployed. That was an increase of almost 600,000 in a year. We now have one in eight of the labour force out of work.
The right hon. and learned Gentleman said that output has turned out broadly as he expected. I dare say that the unemployment level turned out broadly as he expected. The Government calculated on the basis of an increase of unemployment on this scale, unprecedented at such a pace in the history of this country. That is what they calculated, and we shall come again in a minute to their calculations for the period ahead. If they were calculating on a fall in output on that scale, they were calculating also that it would be matched by unemployment on that scale.
I shall give the House the comparison that arises from the position in my constituency. At the time of the last general election, in May 1979, unemployment there was at 12 per cent. That was a very serious figure, more serious than most other places in Wales or Britain. It was about 4 or 5 per cent. above the average figure in Wales and more than double the average figure in the rest of the country.
That 12 per cent. figure is roughly the average for the whole country now. It is the national unemployment figure, while in places such as Ebbw Vale, that have already been heavily hit, the figure has gone up to 20, 22 or even 25 per cent.—huge figures. After one and a half years in which the country suffered by far the most serious decline of any major industrial country, we have suffered another year of almost unprecedented collapse of employment.
It is true, and the right hon. and learned Gentleman made some comparisons in his speech, that one or two other countries have done as badly. The Germans, in recent months suffered almost the same rise in unemployment as we have over this period, and the Americans, driven by the same monetarist mania as our Government, have fared slightly worse. But, last year, the right hon. and learned Gentleman and his friends were saying that this year would be the year of our recovery. Instead, our position has been worse than that of nearly any other country.
The latest figures prepared by the Organisation for European Economic Co-operation for Europe and North America were published in The Times last Friday. I give these figures to put in proper proportion what the right hon. and learned Gentleman said. The OECD figures show that Britain's unemployment rate now heads the list at 11.7 per cent. At standardised OECD unemployment rates, the Netherlands had unemployment of 11.2 per cent., Belgium had 10.9 per cent., Italy 9.1 per cent., the United States 8.5 per cent., Canada 8.3 per cent. and West Germany 8.2 per cent. These are the real figures about the Government's achievements.
Last year, the Labour Party prophesied that we were heading for a figure of three million unemployed. We did not relish it and did our best to say that it could be avoided, 761 and, if the measures that we had proposed last year had been adopted, it would have been avoided. Yet our prophecy was denied by the Conservative Party.
The Chief Secretary to the Treasury made a speech coming to the rescue of the Chancellor. He said that he did not accept our gloomy prospects and referred to the Red Book, to which he attached much importance, and whose cover will soon be changed. He said that the Government would not fall into the mistakes of 1972. What was the terrible crime and error, the folly committed in 1972? The mistake that the Chief Secretary was anxious to avoid was the 7.2 per cent. growth in GDP in 1973.
The Government have avoided that error. Instead of achieving the largest recent recorded rise in GDP, in 1981 they achieved almost the largest recorded fall. That is quite a difference. One would not have thought that from the complacent speech of the right hon. and learned Gentleman.
The Red Book, of which the right hon. and learned Gentleman is so proud, last year forecast a fall in output of 2 per cent. In the event, the fall, according to Government estimates, was 3 per cent. What is 1 per cent. here or there? It is merely British production that is affected.
Perhaps the most disturbing aspect of last year was the rapid rise in the number of long-term unemployed. The number of people out of work for a year or more rose from just under half a million to just over a million, and 150,000 people have been out of work ever since the Conservatives came to office.
In an increasing number of districts—Oakengates, Corby, Mexborough, Consett, Hartlepool, Bargoed, Ebbw Vale, Bathgate, Irvine, North Lanarkshire and many more—unemployment is more than one in five. In Northern Ireland it is only in exceptional areas that it is less than one in five—in Cookstown and Strabane, one person in three is on the unemployment register. Truly, those places have avoided the errors of 1972 under the policy for which the Government were responsible and which they still have the courage and determination to defend. Those areas did not have such agonies to endure then as they now have under the Government who are apparently so successful and have learnt all the lessons to be learnt from previous mistakes. [HON. MEMBERS: "Talk about this Budget."] I am talking about this Budget. I am talking about what should have been in it to deal with a problem on this scale.
We have the largest fall in output for 50 years. In the two years since the Conservatives came to office the United Kingdom has been the only OECD country for which quarterly figures are available to experience an actual fall in output. In that period, our output fell by 6 per cent. That is indeed quite a distinction.
That is the real test by which the Budget must be judged. Does this Budget deal with that situation? Does it go any way at all towards dealing with a problem on that scale? [HON. MEMBERS: "Yes."] I should have thought that only the driest of wets and the least seductive of sirens below the Gangway would take that view.
Let us examine the fiscal position as the Chancellor himself stated it. When he introduced his autumn measures, he said that they must not be judged by themselves, but that they must be judged together with the measures that would come in the Budget. That is a perfectly proper course for us now to take. We shall work out the detailed estimates during the next few days of 762 discussion, but we certainly believe that to make good what the Chancellor took out of the economy last autumn would require an expansion of about £5 billion. The Chancellor has produced nothing like that today. We have the Rooker-Wise-Lawson proposal—I take it that the latter is prepared to acknowledge authorship now that there is some recompense for the previous policy—but it does not carry out the promise or make good the loss sustained by those on the lowest incomes last year. It goes only pan: of the way to dealing with that, but it makes some contribution to reflation.
There are other items that we certainly welcome and that contribute to reflation. There is the reduction in national insurance contributions, which we certainly favour, although when we consider the detail we shall undoubtedly be critical of the refusal to extend it to the public sector, which helps to reduce the reflationary value of the package. On a hasty calculation, the proposal seems now to offer about £600 million, but it is nothing like the full amount that should have been available.
Let us consider the effect of all the measures that the Chancellor introduced last autumn and today, including all the minor measures. There is a long list of proposals, giving £60 million here or £70 million there. We do not dispute that they are valuable in their own way, especially those that the Opposition have constantly proposed to assist industry with energy prices and so on, and of course we welcome them. Added to the package of last autumn, however, it is still on balance a deflationary package, as the House well understands.
If the Treasury believes that our figures are wrong, it will have great difficulty proving that. The Chief Secretary got his figures wrong last year, so it will be a long time before we believe him this year. He was wrong about output, he was wrong about employment, and he was wrong about the Red Book. We shall therefore listen with all the more care to what he has to say tomorrow. Nevertheless, taking the autumn measures and today's Budget together, as the Government argue that we should, it is still a package which, instead of expanding the economy and tackling the massive unemployment that I have described, is more likely to add to unemployment than to reduce it.
When we made our prophecy last year, the Government tried to dismiss it. We shall see who is right this year. The Government are still apparently persisting in the same economic policy that caused the disaster. In that, at least, the Chancellor may be consistent. That is what we fear, and we believe that the figures will bear it out.
It is not just a question of how the economy is hit, but of how individual sections of the economy are hit. The Chancellor did his best today to pretend that he was making good all the deficiences and all the cuts that he had previously imposed through his policies in various spheres, but whether it be the unemployed, the old age pensioners or other sections of the community, very few of the cuts that the Government have introduced and sustained in the past years are fully restored. Some of them are, of course, and we are glad of that. The 2 per cent. cut in unemployment benefit has been restored, but millions of unemployed people will still be receiving less than they would have received if they had received the amounts to which they were entitled under the provisions made by the Labour Government. The Government should restore earnings-related benefit for the unemployed. No one would welcome that more than I. They should restore the 763 earnings-related system for pensioners, which they also took away. They should restore the proper value of the child benefit as the Labour Government introduced it. The increase in child benefit now proposed is in no way comparable to a full restoration of the value of child benefit as it was when we introduced it and which should, more than ever, be sustained at a time such as this.
The Government have dealt with individuals in the same way as they have dealt with the community in general. The Budget cannot be defended on any grounds of justice.
The Government claim that all these measures have been taken to deal with inflation and that they have been restrained from producing the real policy needed to tackle mass unemployment on the present scale because of their valiant fight against inflation. We are told that the objective of all their policies is to conquer inflation. They promised last year—I am sure that Chief Secretary joined in—that inflation would be reduced to 10 per cent. by the end of last year and to about 8 per cent. by now. That has not been achieved. We await the Chancellor's prophecies this year.
It is perhaps sadistic to mention the tax and price index introduced by the Conservatives, under which inflation is now 15½ per cent. It is higher than the average inflation rate throughout the whole period of the previous Labour Government, including the period when we suffered from all the consequences of the oil price increase. The Government say that in all these measures, including the massive rise in unemployment on a scale not seen since the 1930s, and in some respects worse than the 1930s, their whole objective has been to deal with inflation. They have failed to do so. If they are to continue the same policy we shall see further increases in unemployment because that has been the only policy they have had for dealing with our economic problems.
The judgment that the House and the country will make about this Budget will probably be no different from the judgment they made on previous ones. The judgment must be reached on what happens in regard to employment, in regard to output and in regard to restoring full-scale business activity. All the tuppenny ha'penny measures that the Government propose for dealing with these measures are doomed to failure unless they tackle the problem of demand and how they are going to restore it to the economy. That is the very policy that the right hon. Lady demands that no Chancellor of the Exchequer of hers shall pursue.
Far from facing the mammoth task of dealing with the real problems of the nation—it is a mammoth task and none of us minimises it—this Budget is one of shreds and patches. After a while probably the only person who will be enthusiastic about it will be the wandering minstrel of a Chancellor that we have had for the past few years. It is a Budget that fails to tackle the reality of the problem and that fails to look at the mass of human misery that is involved in the unemployment figures. It is a Budget that does not measure in any sense the enormous task that faces the nation. We wish to set about that task as speedily as we can. The first necessity for the recovery of the country is that we should remove not merely the Chancellor but the Cabinet to which the Chancellor owes his allegiance.
§ 6.2 pm
§ Mr. Robert Banks (Harrogate)I am most grateful to have the opportunity of being the first Conservative Member to be able to congratulate my right hon. and learned Friend on the masterful way in which he presented his Budget Statement and the brilliance with which the package he announced has been put together. It is an intricate and comprehensive package. I am delighted to be able to give him my whole-hearted support. Unlike the right hon. Member for Ebbw Vale (Mr. Foot), who spoke of misery and with mealy-mouthed words, I can give my whole-hearted support to the Budget Statement.
Every Budget attaches to itself an importance which the press frequently gives it as a point of turning in the nation's fortunes and of great build-up. This Budget is no exception. It was of prime importance for the Chancellor to capture the mood for industrial expansion and to show that he was prepared to give help to small businesses to aid that expansion. This he has done. His task was not only to inspire confidence in our achievements so far and our abilities, but to give greater impetus to industry so that we can pull ourselves out of the recession and build a strong industrial base on which to reduce unemployment and to found fortunes for our country in the long term.
I particularly welcome the reduction in the national insurance surcharge, which will be a major contributory factor to the psychological impact on industrialists. It shows that Government are behind the industrial expansion that we wish to see and are prepared to support our industry with hard cash.
My right hon. and learned Friend has outlined the plus factors in the equation of our economic situation. My overriding concern, which was shared by my right hon. and learned Friend, is for the enormous problem of unemployment. All that we have heard this afternoon is aimed at reducing unemployment. The problem is how we deal with it. There are no quick solutions. This Budget will not result in a dramatic reduction in unemployment. It is a long-term business. In this respect, I must refer to the annual economic report of the European Community, which is the subject for this short debate and which has some interesting things to say about how, in the long term, we should deal with the problem of unemployment.
The report lists three areas where greatest priority should be given. The first is to expand special employment measures, this the Chancellor has done. The second is to reduce the employer's national insurance surcharge. This the Chancellor has done. The third is to introduce worth while investment projects. This I believe the Chancellor has also done.
The boost that the Chancellor has given to the construction industry, which, after all, is a central pillar for providing employment, has been of enormous help, particularly through the 14 per cent. increase in Goverment expenditure, the increase in housing improvement grants, the spur to building small workshops and the incentives to the building of houses for private letting. These are important measures and, as a whole, will be one of the prime movers in reducing our unemployment problem.
The European and international picture presents a deep, built-in problem of an exceptional nature. For the Community as a whole, unemployment in 1979 was 5.5 per cent. It reached 8.3 per cent. by August 1981. Between the last half of 1980 and the first half of 1981 765 unemployment in the Community rose by 35 per cent. Therefore, I wish to stress the importance of us keeping our unemployment problem in perspective within the Community and as part of the international problem that surely exists.
On top of this we are seeing the expansion of the population of working age. This expansion is faster than has been the case for many years. The rate of growth of people of working age in population terms is forecast to double—that is, 0.5 per cent. growth during the 1970s compared with a 1 per cent. growth factor by 1982. This period of growth in the numbers of people coming on the work market will run through to 1985.
We are also seeing an increase in the female work activity role. This also contributes to the high unemployment of men. The low birth rate during the First World War means that the number of men retiring in 1982–83 is exceptionally low. This is another factor which inevitably contributes to our high unemployment rate.
Raising productive efficiency has also contributed to the rate that we have to endure. The textile industry, which is by far the most labour-intensive, has, as we all know, suffered hugely from the recession. The labour content per thousand units of value added in 1979 was, for instance, in West Germany 100, in France 110, in Italy 150 and in the United Kingdom 187. The House will understand the scale of the problem that the textile industry has had to face in adapting to the introduction of modern techniques, technology and other methods to improve its competitiveness if it is to deal with Common Market, let alone international, competitiveness.
The report identifies four areas of greatest future potential for a return to a more balanced employment situation. The success of the Community, and of Britain in particular, is dependent on us and our colleagues in Europe achieving leading positions in four identified areas. The first area is energy, which covers new sources of energy and conservation. I particularly welcomed the incentives to conservation which my right hon. and learned Friend gave. I should have preferred stronger measures to be adopted to add greater incentives to people to conserve heat in their own homes, but he has taken some measures—the zero rating on double glazing and the housing improvement grants—which will have an affect on conservation. Those are good measures.
The advances in finding new sources are being researched, and many are being introduced. This is an area which I think will, through the private sector, have a large part to play.
The second area is in microelectronics. I do not think that any hon. Member will doubt the importance of this industry to our future. I believe that my right hon. and learned Friend has also pinpointed this particular sector as being one of the key areas where the Government's incentive is important. The purchasing machine at the Government's disposal is a means by which incentives can be given to firms to develop new equipment. The incentive lies in the market that it presents.
The third area is aerospace. I believe that this is important. I think that about 80 per cent. of the world's aircraft production was manufactured in this country in the 1950s. We are now down to about 5 per cent. It is a sorry tale. But we still have the technical ability in this country to expand through co-operation within the EEC, 766 particularly with France and Germany. It is in co-operation that we can best achieve greater employment opportunities in our aerospace industry.
The fourth area is biotechnology. This is a new area—one in which the chemical and agriculture industries have a large part to play.
It is worth referring to those four areas, because in this country we tend to think only in terms of our old and traditional industries. The shipbuilding industry is a case in point.
Those new industries provide new areas for new businesses and for industry to see its most rapid expansion. It is, by necessity, important that research is channelled into these industries, where, if we leave it too long, the United States and Japan will snatch those markets from us. They already have a lead.
I would add to that list one area of special concern to me—the tourist industry. That is the wrong term, because it should cover all those who come to this country for conferences, exhibitions, seminars and so on. But it is an industry. I am bound to tell my hon. Friend the Minister of State, Treasury that I regret very much that we have not been able to give the tourist industry—the hotel industry, in particular—the same classification as industry, through industrial building allowance—the tourist industry—has. It is important that we think in terms of our service industry as an industry and that we treat it as such. There is an area which is labour-intensive and which will provide many more jobs when the upturn comes and there will be a greater movement of people.
The nation looks to the Government to set a pattern to deal with the long-term problems of unemployment—long-term, as indeed they are. If one looks at any graph, any projection, one will find that the present unemployment rate is projected to run right through into the twenty-first century. Those projections may not be right. Who knows at this stage what the final answer will be? Inevitably, with the advance of technology and all the problems that the Western world has to face, in the medium term and in the long term we shall have to live with a higher unemployment rate. Therefore, it is essential to stimulate job creation in whatever way we can.
I believe that my right hon. and learned Friend has done an immense amount to stimulate job creation through the introduction of new businesses and the stimulus that he has given to new businesses to get off the ground and start up. Co-operation with our EEC partners is important to that.
It is important that we look at a lower retirement age as a means of dealing with the particular problem that we have at present of more people staying in jobs longer, because of the birth rate to which I referred earlier, and at lengthening the period of education for the young. Those are long-term objectives.
At the same time, we must make investment more worth while. I believe that in this Budget we have seen, for the first time, a real incentive to people to invest in the equity of companies and to put their money where it really should be—in savings. If we can get more money into savings, there will be less recourse to the money markets to borrow money to fund Government expenditure, which means that interest rates will tend to come down. The money in the market place is for businesses to borrow and not, in my view, for Governments to borrow. But we live 767 in a situation in which that has got built into the equation of the economy. It is important that we look to every other means at our disposal to avoid recourse to those markets.
The special employment measures, to which I referred earlier, have been greatly enhanced by what my right hon. and learned Friend said this afternoon.
I believe that there is a period during which we may have lower interest rates although, with higher interest rates in the United States being forecast—the question is whether those forecasts are accurate—it is difficult for the Government to control interest rates.
The Government have a buying machine at their disposal. I hope that they will use it to the fullest possible advantage to create jobs in those new industries which will secure the greater prosperity for the nation that we all want to see.
§ Mr. J. Grimond (Orkney and Shetland)The Chancellor of the Exchequer said that this was a Budget for industry. Looked at from that point of view, it seems to have some good points but not to go far enough.
The general tone of the Budget was well illustrated by two details. The first was the welcome cut in the national insurance surcharge. However, I think that the cut is half the amount that it should have been. The second was the 30p increase in the duty on whisky, in which I have a constituency interest. The distillers may be pleased that it is not 50p, but I strongly suspect that it is 30p only because consumption is falling and that the Chancellor has made a virtue out of necessity. Both items seem to me to be steps in the right direction not going far enough.
The long-term aim must be to achieve expansion without inflation. The Government have done little so far to deal with the root causes of inflation and poor productivity. Any improvements that there have been—the fall in inflation and some increase in productivity—have been largely due to very high rates of unemployment. That seems to be a bad and, we hope, temporary reason.
The key is increased productivity. I find it extraordinary that successive Governments have put serious obstacles in its way. Surely, two of the greatest benefits that a fairy godmother could confer on the British economy are an increase in private productive investment and an upsurge of entrepreneurs anxious to employ labour. Yet, to judge by recent legislation and tax policies, one might think that private savings investment and the employment of labour in trade or industry were antisocial practices to be positively discouraged. Sometimes I think that the only thing the British think is respectable is to work in the public service.
It is true that the Government have poured large amounts of taxpayers' money into industry, but real productive investment has been falling, as in a sense the Chancellor said, and much of what now counts as investment is not really investment at all; it is either waste or it is put into nationalised industries and so on simply to make up deficits or to pay wages. Again, it is obvious that a great deal of our trouble stems not only from inadequate investment but from a failure to use the investment that we make. The Chancellor certainly appreciated that point. I am extremely glad to hear that he is encouraging private capital to go into the nationalised industries. I hope that 768 they will go into the market for more of their capital. I believe that private investors will be more effective in supporting industry than the Government.
Private investors are still being exterminated. The FT index is still under 600. It would have to be at 2,600 to compare with 1969 prices. If the investor makes money, he pays capital gains tax and, furthermore, is surcharged on income. I do not believe that the Chancellor mentioned that matter. Industry had been squeezed out of the bond market and is falling more and more into the hands of pension funds. The number of people who own shares is one of the lowest in the free, highly industrialised countries. The Chancellor took note of that, and I welcome his measures to increase participation. Nevertheless, we have a long way to go.
Any employer who takes on new workers today runs the risk of the Employment Protection Act 1975. If an employer pays £50 in net wages, the cost to him is more than £80. He also is responsible for redundancy payments. Those would seem to be crazy measures in a country where there are three million people crying out for employment.
I maintain that the third mistake is the Government's energy policy. The Government have fallen into the habit of saying that something can bear more taxation because it is no dearer that it once was or that in some other country it is equally expensive.
My constituents greatly resent the fact that petrol, which is essential to them, is lumped together with wine, spirits and tobacco as something which is fair game for increased taxation. I welcome the reduction on avgas, and I suppose that an increase of 9p a gallon could be worse. In my constituency, a gallon of petrol costs 20p or 30p more than in London, which is an extremely heavy impost.
If Britain is to recover, we must take advantage of some of the things that we can offer cheaper than our competitors. The idea that we should make ourselves uncompetitive in every direction is false. Sometimes I wonder what twentieth century Governments would have done in the nineteenth century. Would there have been swingeing taxes on coal and horses? If so, the Industrial Revolution would have been stopped in its tracks. Perhaps that would have been their intention.
The reason that taxation has to be so heavy is partly the public sector's enormous thirst for more and more money. In spite of what the Chancellor said, I believe that the Government's efforts to reduce the non-productive private sector have not been successful enough.
I should like to make some suggestions. First, energy should not be regarded as an easy way of raising taxation. It should be regarded as one of the few advantages that British industry has. The North Sea should be regarded as a great benefit to be shared more widely, particularly by industry.
Secondly, capital gains tax should fall only on real gains. The Chancellor went some way towards this, but I am not quite clear how far. If it is to be related entirely to the increase in the cost of living, he may have gone a long way. I believe he said that it was impossible to index.
Thirdly, I believe that local development banks should be available to invest local savings in local industry. At present, the only way to deal with local savings, which are large, is to put them into Government stocks where they lose their value and do no good to their neighbourhood.
Fourthly, I should like to see a moratorium on Government borrowing through the gilt-edged market. The Government have increased the national debt by 50 769 per cent. in three years—an appalling record. To some extent, inflation devalues that debt, but it is a frightful burden that we are leaving to our successors. The Government have destroyed the investment market for industry and will make it extremely difficult to operate a bond market.
Fifthly, we should be simplifying the tax system and social security payments. They are an absolute cat's cradle and employ far too many people. The situation is getting worse. I should like to see the introduction of reverse income tax, and a much simpler system of social welfare.
We must realise that important though machines are, the great unused capital asset is labour. I wholly agree with those who say that more emphasis should be put on getting labour to work than increasing static capital. Some capital is becoming very short-lived. Although all training is excellent, we are apt to overlook the importance of semiskilled training. There is an enornmous demand for anyone who can mend something or do a routine job.
It is not only the highly sophisticated technologies that offer good employment. The Chancellor's scheme to involve the unemployed in the improvement of housing and the neighbourhood is most welcome. I am bound to say that that comes straight from Roy Jenkins, ex Layard. it is an ingenious piece of poaching. The Government have been poaching Liberal policies for the past 15 years. I am glad that it goes on, but I believe that a little recognition should be given to the originators of the scheme—Professor Layard and Liberal-SDP experts, of whom we have many.
I believe that the Government should take another leaf out of Professor Layard's book. They should pay employers to take on those who have been unemployed for six months. It is a cheaper way of creating new jobs than a general across-the-board cut in the national insurance surcharge. Having begun that admirable theft of alliance policy, I recommend the Government to continue, but when they go to Hillhead they should make it quite clear whose policy it is.
There is widespread agreement that two of the most serious difficulties facing the country are, first, restrictive practices enforced by trade unions in some industries and, secondly, the immense size of the public sector. It is becoming apparent that we have reached the limit of taxation; yet there are more and more demands for public money.
I hear that the Health Service is in serious difficulties due to lack of funds. Yet it is expanding enormously in terms of personnel at the very time when it lacks funds. I hear pleas for more Government money for the arts, the environment and every sort of cause. People are willing to pay for a better service, as can be seen by the way that private education and health schemes have continued, in spite of the depression. The result is that national schemes, which are the mainstay of the bulk of the population, suffer.
I think that those two things must be brought together. I do not believe that we can charge for everything. I disagree with some of the things in Arthur Seldon's book on the subject, but I recommend the Government to look into it more closely. I do not believe that services will be maintained by levying more and more taxation. The tax base is too narrow. It falls too much on productive industry and will break down. If we are to control inflation, we must increase productivity. If we are to increase productivity, we must look more radically at our taxation 770 methods, the structure of our financial and industrial inheritance and the resources that the Government can channel for public purposes.
§ Mr. John Lee (Nelson and Colne)I should like to pay tribute to what I consider to be a realistic, sensible and humane Budget. It is right that the vast majority of help and relief that is available should be directed to industry, particularly as we are now in the foothils of recovery. I praise the reduction in national insurance surcharge, as recommended by the CBI, the enterprise package and the help for the construction industry, which will encourage many small and medium-sized building firms to take on more labour. I also welcome the innovation package in this Information Technology Year and also the help that will be available towards meeting energy costs.
I wish, however, to make a plea to the Chancellor. My right hon. and learned Friend should consider helping not only larger firms but many medium and smaller firms with their energy costs. I think especially of the many medium-sized textile manufacturing firms in my constituency. My hon. Friend the Member for Harrogate (Mr. Banks) has already referred to the problems of the textile industry. I know, too, that the hon. Member for Rochdale (Mr. Smith), who is also my friend, is concerned with the problems of the textile industry. Such assistance would be a considerable benefit and would be much appreciated.
I should like to make three personal observations. First, the whole House I am sure, will be delighted that the obscenity of the excesses of the golden handshake are to be tackled. Secondly, it makes good sense—the right hon. Member for Orkney and Shetland (Mr. Grimond) has also referred to this matter—to bring inflation into the calculations of relief for capital gains tax purposes. Thirdly, we, on the Government Benches, should take pride in the fact that privatisation policies in respect of British Aerospace, Cable and Wireless, the National Freight Company and Amersham have resulted in 70,000 employees becoming shareholders in those four enterprises. This achievement is not proclaimed loudly enough.
In regard to individuals, hon Members should welcome the improvement in pensions, child benefits, the fact that mobility allowance will be exempt from tax and relief for charities. These proposals demonstrate the humanity of the Chancellor and of the Government. No Budget satisfies everyone. I believe, however, that this Budget is on the right lines. To have increased substantially Government spending at this stage would have prejudiced our major counter-inflationary policies and would have raised a question-mark over the downward trend in interest rates that will be so vital to the economic recovery of the country.
§ Mr. Roy Hughes (Newport)The right hon. and learned Member for Surrey, East (Sir G. Howe) has been Chancellor of the Exchequer for the past three years. It seems to me, having listened carefully to his speech today, that he has come to the end of the line. He does not seem to realise that the major problem facing the country is unemployment. He offered little hope today to the unemployed.
One does not wish to be ungenerous to the Chancellor. One felt, however, that all he displayed was a ragbag of incidentals. At the risk of incurring the wrath of he 771 feminists, it is fair to point out that he is suffering from a rather overbearing petticoat Government. The Prime Minister believes in rule by fear and that 3 million unemployed are the best incentive to bring down wages and to reduce the level of social services. From the outset, doctrinaire, monetarist and fiscal policies have been pursued. They are continued in the Budget today.
The result, over a period of nearly three years, has been to more than double unemployment despite the poster that appeared before the last election showing Saatchi and Saatchi employees lined up in a queue and the slogan "Labour isn't working". The period of Conservative Government has also produced a lower standard of living for many millions of people. The cynical approach of the Prime Minister to these problems was illustrated when she told people, during a visit to Swansea, that if they could not find work there, they should move, heaven alone knows where to. Heavy unemployment is now rampant throughout the country. There has also been the helpful advice of the Secretary of State for Employment telling people to get on their bikes.
The expression has been heard from time to time that there is light at the end of the tunnel. I did not see much of that light today. From an unemployment standpoint, the prospect looks as black as night. I endorse the sentiments of my right hon. Friend the Member for Ebbw Vale (Mr. Foot) who forecasts that the dole queues will lengthen.
With regard to output, an article in the business pages of The Times on 1 March—St. David's Day—pointed out that
The lost output in 1981 alone amounts to more than total government spending on health, housing and social services combined.That seems a pretty formidable indictment from a newspaper that is allegedly Britain's voice in the world.In his Budget, the Chancellor has tinkered with minor details—houses for rent, small workshops, and community work for the unemployed. What the unemployed want are real jobs. The Chancellor and the Government wholly fail to recognise that Britain today suffers from a lack of effective demand—in other words, lack of purchasing power. The mad monetarist policies, allegedly applied to squeeze out inflation, have reduced the purchasing power of large sections of the population. The minor concessions, particularly in taxation, given by the Chancellor today will not rectify the situation. Unless there is a major turn around of policy, which can only be brought about by a change of Government, economic recovery is well nigh impossible. Unemployment will continue to soar, as most economic forecasters say.
This situation has been brought about in a country that has vast energy resources. We are the envy of the industrialised world. It is a terrible tragedy that the revenues from North Sea oil have to be used not to regenerate British industry but to meet the cost of keeping people on the dole and to pay other social security benefits. The top priority of any Chancellor and any Government now is to get people back to work and to produce wealth. The Chancellor, again today, has failed to meet the challenge.
Unemployment in economic terms is waste. It is like a tap left running. It is right that the Opposition should be asked what is their alternative. I have ,every confidence, 772 when the major debate starts tomorrow, that my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) will put forward Labour's alternative economic strategy.
The Opposition are agreed that a massive expansion is required in the public sector. That point of view now seems to be shared by many leading Conservatives. It was expressed by the right hon. Member for Chesham and Amersham (Sir I. Gilmour) and, of course, he was sacked for his heresy. Similar sentiments have come from time to time from the former Prime Minister the right hon. Member for Sidcup (Mr. Heath). Even the chairman of the 1922 Committee, the right hon. Member for Taunton (Mr. du Cann) spoke about the need for the Government to enter into major capital projects. Perhaps they will reiterate those sentiments during the Budget debate.
Of course, the TUC has put forward an imaginative plan in its 1982 economic review. It calls for a reflationary package worth £8,300 million, public spending of £6,000 million and a 2½ per cent. cut in VAT. I and other hon. Members have been bombarded in recent days by literature from various sectors of the building and construction industry, stating, for example, that Britain's housing is falling behind. Yet men are in the dole queues and materials are more or less rotting in the builders' merchants' yards. There is also literature from the British Road Federation and the RAC calling for more money for roads. They say that bypasses are urgently needed and that more maintenance work is required on our roads because they are fast deteriorating.
All that we have received on roads from the Chancellor is a fleabite. Being parochial for a moment, there is now an urgent need in South Wales for a second Severn bridge. For once, I agree with the Welsh CBI, which makes the same call. What an appropriate gesture it would have been today if a South Walean such as the Chancellor could have said, in his Budget Statement, that the money would be made available for the building of this second Severn bridge. All we have got now are lane restrictions on the bridge, which is so vital to the economy of South Wales. Indeed, it is as if the whole economy of that area is hanging by a gossamer thread.
So many other schemes could be engaged in, such as rail electrification and the Severn barrage scheme, which is a real investment for the future in the vital field of energy supplies. People are simply crying out for a bit of hope to point a little light to the future.
Despite all the ideas put forward, the Chancellor, aided and abetted by the Prime Minister, does not want to know. All the reliable forecasters are now predicting that, from an unemployment point of view, we shall have a slump for the rest of the decade. The Budget has merely tinkered with the situation today. With the inertia being shown by the Government over this problem, is there any wonder that outside there are calls for extra-parliamentary action? The Government engineered this recession. Market forces were to be released. Today's Budget is part of the same pattern, and the Government are failing to understand that their gamble is not coming off and that 3 to 4 million unemployed are the result. The figure seems to be forever increasing.
Alongside public expenditure, there is also a need to control trade. Some form of import controls are vital. Otherwise, if we inflate the economy to the required degree, we shall suck in imports and add further damage to manufacturing industry, which will also undermine the balance of payments situation. However, with import 773 controls, as output picks up, trade will expand and overall imports in the long term will grow. Our competitors, particularly in Western Europe, have nothing to fear from such a policy. There is an urgent need to protect key sectors of manufacturing industry, particularly those where vast sums of public money have been invested.
In conclusion, therefore, all we have really had today is a Budget of no hope for the unemployed. In three years, immense harm has been done to the economy. The Conservative Party has again become identified as the party of the unemployed. They deserve to be thrown out at the earliest possible opportunity.
§ Mr. John Stokes (Halesowen and Stourbridge)I heartily congratulate the Chancellor of the Exchequer, as did my hon. Friend the Member for Nelson and Colne (Mr. Lee), on a sound and carefully thought out Budget. I particularly like its theme: recovery does not depend so much on Government but on industry, commerce and on the efforts of all of us in Britain.
I cannot remember a Budget in recent times about which there has been such a welter of speculation beforehand. The amount of influence that the Government have on affairs is only marginal and is much less than many people suppose. Our salvation as a people lies with all of us. We expect and hope for a lead and the Chancellor has given us one this afternoon. He has refused the blandishments of those who wanted a massive reflation, such as that advocated by the Opposition this afternoon. He has kept as his main object the defeat of inflation. Governments have always faltered in the end over that aspect. The Chancellor will be rewarded for his steadfastness from next year onwards.
Recovery from the world slump because of lack of competitiveness in much of our industry has been, as we all know, painfully slow. However, I must judge the Budget on its effect on manufacturing industry and on the incentive which people have to work hard and give of their best. The Budget has given us great hope on both those counts. I marvel that people in my constituency, where firms have been hard hit, hardly ever complain. They deserve some encouragement for their stoicism, and the Budget will give it to them.
I welcome the cut in the insurance surcharge on companies. I also welcome the improvements in personal taxation, although we are still as a country too highly taxed, and I should have preferred 1p or 2p off the standard rate.
I am still disappointed in the spending economies that the Government have so far been able to make. However, I welcome the cutback in university spending which has been too rapid since the 1960s, too indiscriminate and lacking in any sort of rationalisation of the various departments. The staffs at these universities and colleges have in some cases become too complacent, having what they think is a ticket for a career for life without any requirement to justify their efforts.
I wish that we could have reduced the Civil Service more effectively. The increase in numbers in sectors such as the National Health Service is most worrying. As we all know, local government costs central Government far too much. In spite of all the efforts of the Secretary of State for the Environment, local government staffs have been reduced by only 3 per cent.
774 Finally, we have the continuing problem of the nationalised industries, which still cost the taxpayer so much. The lushness and comfort of their employees is a standing affront to all the people, for instance in my constituency, who have suffered so much in the private manufacturing sector. I am certain that the only long-term solution is to sell those industries to the public and make them properly accountable to real shareholders. I am glad to hear that the Government are continuing with this good work.
I am disappointed that there has been no mention of more quangos being abolished. I agree with the right hon. Member for Orkney and Shetland (Mr. Grimond) that we need more of a candle-end, Gladstonian mentality in the Treasury and every other Government Department. However, I congratulate my right hon. Friend the Secretary of State for Defence on his clever financial management of the Armed Forces, while at the same time fully maintaining their effectiveness.
We are all glad about the fall in interest rates, and we hope that the trend will continue. Certainly that is 'the dearest wish of industry. It will continue if the Government can reduce their spending and thus their borrowing.
I welcome the different amounts of help given to small businesses in the Budget. The Government should do all that they can to help entrepreneurs.
I am glad, too, that help is being given to encourage as many firms as possible to adopt the new technologies. In this respect universities could pay for some of the expense that they cost the nation. The traditional West Midlands industries, which have been very hard hit, need a newer and higher technological base. Confidence is a tender plant. The Government must now try to instil it. They should try to make every entrepreneur and small businessman feel that their efforts are contributing directly to the national recovery. In the long term, that is the only way to get down unemployment. I do not believe that large companies will ever again employ the huge numbers that they used to employ. We must look to the start-up of many small businessess, which we hope one day will become larger companies.
I hope that the whole ramshackle area of special development help and other subsidies will be re-examined. In this respect there has been an enormous waste of taxpayers' money. The effect of these policies on the once prosperous West Midlands has been nothing short of disastrous. Work was taken away from us by force, and with beguiling incentives given to other areas, where unfortunately the work force did not have either the same experience or dedication.
I hope that in time all these payments will be phased out. They are enervating to the areas concerned, apart from all their other dangers. I would prefer a straight cut in income tax for every worker in every part of the country.
Vast sums of money are still going to nationalised concerns. I hope that we shall have no more De Loreans. On the other hand, British Leyland and British Steel at last look more encouraging, and we hope that their good new management will succeed.
I welcome the new scheme of voluntary community work. This is something that the country can do well. It will help national unity and cohesion, and it will bring 10,000 unemployed people back into the mainstream of national life.
775 I welcome the additional benefits to the unemployed, the sick, and especially the disabled. These give the lie to the belief that we are a hard, uncaring party. Our background of help and sympathy for those less fortunate than others goes back to the days of Lord Shaftesbury, or earlier.
I very much welcome the special help to industry with energy prices. In particular, I welcome the help to foundries, of which I have many, in the reduction in the duties on coke. I am delighted to hear of the different kinds of extra work which will come to the construction industry. In fact, the more one looks at the details of the Budget, the more one realises how carefully it has been thought out, and how its benefits will be spread right across the country.
We must not expect too much of a Budget or of a Government. Just as it is silly to blame the Government for our economic ills, so it is silly to expect the Government to put our economy right. As I have often said, our troubles in this country are not really economic but moral and spiritual. We should ask ourselves why we have failed so signally in recent years to compete with the management and the work force of the United States, France, Italy, Japan, and so on. It is a deep-seated problem that no Budget will cure. It requires a complete change of attitude. We have to alter our thoughts about work and effort, particularly work involving a profit at the end, out of which future work will come.
I wish that manufacturing industry would enjoy the same prestige as the professions do. I wish that the best of our young people would go more into industry and commerce. Then I believe that we should surmount all our economic problems. Sometimes we forget the enormous brain power that we have in this country. People come from all over the world to make use of our brains. However, we need to direct some of those brains to profitable enterprise. Then we can have the better social and other services that we all want. The Prime Minister is 776 constantly and, in my view, rightly reminding us that it is the results of manufacturing industry which create the wealth on which so much of our life depends.
Having got inflation down to single figures, which I believe that we shall do by the end of this year, or early next year, and with industry so much more efficient, so much less over-manned, with many fewer restrictive practices, and with, I believe, a much more confident and vigorous management, we as a country have the opportunity to forge ahead.
The fall in the price of oil will transform industry's prospects. People must shake off the mentality that Britain always has a problem and we must go forward and grasp the opportunities with both hands.
§ Mr. Tam Dalyell (West Lothian)rose—
§ Mr. David Hunt (Wirral)I beg to move, That the debate be now adjourned.
§ Mr. Deputy SpeakerI have called Mr. Tam Dalyell.
§ Mr. DalyellThe Chancellor of the Exchequer mentioned in the Budget statement help to smaller engineering firms. If he means what he says, why is it that with the left hand—
§ Mr. David HuntI beg to move, That the debate be now adjourned.
§ Mr. Harry Ewing (Stirling, Falkirk and Grangemouth)Sit down and do not be so impertinent.
§ Mr. Deputy SpeakerA speech cannot be interrupted to move to adjourn the debate. The clock is striking Seven o'clock.
§ It being Seven o' clock, and there being private business set down by The CHAIRMAN OF WAYS AND MEANS, under standing Order No. 7 (Time for taking private business), further Proceeding stood postponed.