Finance (No. 2) Bill

HC Deb 10 April 1984 vol 58 cc289-349 10.11 pm

Mr. Colin Shepherd (Hereford)

I am grateful, Mr. Deputy Speaker, for the fact that I have the opportunity to catch your eye, because I know that many hon. Members wish to speak, and therefore I hope that the hon. Member for Pontypridd (Mr. John) will forgive me if I do not follow his wide-ranging speech too closely.

I generally support the Bill. It is challenging, stimulating and thought provoking and in the long and short term it will benefit the nation's economy. That is a broad-brush approach.

I have a specific interest tonight. The Bill applies globally to all industries and people. I find parts of it difficult to sell. I am not particularly enamoured of value added tax being applied to building operations, but I recognise the strategy behind that.

There is one curious aspect of the Bill which does not apply globally; it applies geographically and to a specific industry. I refer to the curious treatment of the cider industry which is dealt with in clause 1 and to which I wish to direct my remarks. I am glad that the Minister responsible for excise duty is in the Chamber, so that my message will reach where I want it to go.

In his Budget speech my right hon. Friend remarked: As for the rest of alcoholic drinks, cider, which increasingly competes with beer but attracts a lower duty, will go up by 3p a pint."—[Official Report, 13 March 1984; Vol. 56, c. 302.] It might be 3p a pint to the Revenue, but it is 5p a pint over the counter. That is a substantial increase in duty for a commodity whose popularity is growing modestly. The implication is that somehow cider is unfairly competing with beer. I cannot understand that. On average, in January 1984 pubs sold best bitter at 66.3p a pint, ordinary bitter at 60.5p a pint and draught cider at 69p a pint. Because more than 50 per cent. of cider is sold through outlets owned and controlled by brewers, brewers set the price. There is no question of cider competing unfairly in terms of price.

I shall put consumption into perspective. Between 1979 and 1982, beer consumption was down by 149 million gallons. That may have been bad news for the beer industry, but cider consumption increased by 13 million gallons. No one can say that cider is moving in to take over from the market from beer because cider has a competitive price. Cider is winning in its own right. Clearly, it is not substituting for another product.

I wonder about the curious treatment of cider and whether there has been some nobbling by the beer industry.

The Minister of State, Treasury (Mr. Barney Hayhoe)

indicated dissent.

Mr. Shepherd

My hon. Friend shakes his head. On 8 March—a significant date—at a press luncheon the chairman of the Brewers Society said: For reasons that have never been explained, cider at the same strength as beer currently pays tax at only one-third of that on beer. This is unfair for the two drinks are clearly in competition. I do not believe that they are in competition. I believe that, somewhere along the line, the beer lobby is getting at the cider industry. I have a specific interest in the cider industry, because more than 50 per cent. of the cider consumed in this country, and an enormous amount that is exported, is made in Hereford. That is a fine employment base.

There is no comparison between the methods used to make those drinks. They employ vastly different manufacturing techniques and raw materials. Cider makers have nowhere near the economies of scale enjoyed by brewers. The cider makers of Hereford, who are not owned by the brewers, are slightly different from the Somerset cider makers. I have much sympathy for the Somerset cider makers, which are owned by the brewers, and are, therefore, nobbled in their approach.

A solid slug on cider has been imposed before. In 1976, under a Labour Government—I am sorry that the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) is no longer in the Chamber, because I believe that he was the Chief Secretary to the Treasury at that time — a 3p special cider tax was imposed. Consumption was slashed, and profitability in the cider industry slumped. It was 1982 before the position was redressed. I had hoped that the lessons were learnt then. I raised those matters during Adjournment debates. At that time, it was predicted that Hereford would consequently lose 160 jobs, and 140 jobs that were expected to be created were not created. That was exactly what happened.

On hearing this curious news about an extra 1p being imposed on cider than was put on beer so that cider was singled out for special treatment, my antennae twitched and my hackles rose. I took recourse to my calculator. The press release on anticipated revenues shows that in each year £5 million extra will come in. The increase of 2p a pint for beer and 3p a pint for cider will total £15 million. If the lesson of 1976–77 is anything to go by, consumption will fall. If it decreases by 7.35 million gallons — a mere 11 per cent. — the Chancellor will receive no increase in revenue. Therefore, the cider industry may be in bad shape because of lack of investment, with employment jeopardised and confidence going, and without any real increase in revenue. That is specific to the cider industry.

I ask my hon. Friend to consult his right hon. Friends —I am delighted to see the Chief Secretary back with us, because I know that he takes this matter seriously—and bring forward their own amendment to clause 1 in Committee to put beer and cider on level pegging so that we know where we stand and this curious little anomaly in regard to cider is not left outstanding. In all justice, I do not think that it can stay.

In opening the debate my right hon. and learned Friend said that one of the purposes of the Bill was to improve prospects for jobs. I should hate to think that for the measly imposition of an extra 1p per pint on cider we would jeopardise the cider industry and get no revenue from it.

10.21 pm

Mr. Archy Kirkwood (Roxburgh and Berwickshire)

I hope that the hon. Member for Hereford (Mr. Shepherd) will not take it amiss if I do not follow him in his dissertation on the various brews concocted in his constituency. I look forward during the many long hours in Committee upstairs or downstairs to discussing the relative merits of what is made in Hereford as opposed to the beverages that are made in Scotland.

This is the first Budget for which I have been present. I have been told by my Chief Whip that lack of knowledge or experience is not considered a handicap in these debates. A fresh eye on the way Budgets are conducted may not be a bad thing. My view, for what it is worth, is that the Prime Minister put her finger on it when, addressing the Conservative central council in Birmingham, she dubbed the Budget a true Tory Budget. One does not have to look far beyond the presentational niceties that the Chancellor demonstrated to determine that the Budget is unfair with the shift to indirect taxation and the way in which it has been rigged at the expense of the poor for the benefit of the rich. That is the basis upon which I start.

Many significant social policy questions have been left unanswered. For single parents, the unemployed, the poor who are in work, the disabled and the elderly, there was very little good news in the Budget. The introductory paragraph of the report of the Treasury and Civil Service Committee, which referred to the need for reforming the way in which Budgets are considered, is not misplaced. I hope that the report of the Armstrong committee, which reflected the work of the Institute of Fiscal Studies, will not languish gathering dust much longer. There is increasingly a case for considering reform of the Budget procedure fundamentally.

Cuts in housing benefit, a necessary social service, were announced towards the end of last year. Through those cuts, £185 million is to be shaved from the social security Budget. I was astonished that that tax cut was not introduced as part of the Budget. I am confirmed in my view that Budget procedure should be reviewed when I find that social security upratings are not announced in the Budget but must await the retail price index figures for May and June. All that leads me to the conclusion that Budgets are out of date and that the Budget procedure should be substantially reformed.

From my assessment of the underlying assumptions in the Budget, I think that the Chancellor is living in the same situation as Alice in Wonderland. When we look at his short-term inflation forecasts and contrast them with the trends that we have seen in industrial earnings, we find that his forecasts for inflation are optimistic, to say the least. His growth forecast at 3 per cent. is extremely optimistic. His whole strategy is based on continuing and sustainable growth in the gross domestic product, and I do not think that that hope will be fulfilled. His own party will—and should—show little mercy in its subsequent treatment of him if history proves that his underlying assumptions were wrong.

The Bank of England Quarterly Bulletin recently described the present recovery as "different but durable". I study the various charts and graphs as a layman, and they seem to show that the recovery is exceptional only to the extent to which it is feeble and unsustainable. The Chancellor will be proved right or wrong in the course of time, and I look forward to continuing debate in the House on these matters.

Only this morning I read for the first time the report of the Treasury and Civil Service Committee on the 1984 Budget. Some of the contents of the report repay very careful study. I refer in particular to paragraph 5. The right hon. Member for Worthing (Mr. Higgins) said that the Government have a stated policy that revenue should determine expenditure and not the other way round. The Green Paper, dealing with "The Next Ten Years", spells out the reasons for that policy. It says: The growth of public spending has, over the past twenty years, been the motive force which has driven ever upwards the burden of taxation on individuals and companies alike. The Government believes it is necessary to reverse this process". Indeed, any sensible person would agree that revenue should determine expenditure. But in a stiff cross-examination the Chairman of the Committee, the right hon. Member for Worthing, asked the Chancellor: On what criteria do you determine the level of taxation? The Chancellor was forced to reply: That is a matter of judgment. That is not a good enough answer, even to my untrained mind.

In paragraph 7 the Select Committee says: If there are no clear criteria by which the availability of finance is to be determined and it is merely a matter of judgment, it is difficult to understand how the figure for the level of taxation can be effective in restraining expenditure. That is what the Government are supposed to be doing. The paragraph continues: The Chancellor implies that the old policy of expenditure determining revenue has already been reversed. But it is difficult to discover what the new mechanism is or how it is applied in practice during the course of the financial year. The Select Committee was right in highlighting the absurdity of the position. It came to the conclusion— and in studying the report I felt that it was right—that expenditure has determined taxation despite medium-term financial strategy in the recent past, and that position should not be allowed to continue.

I notice with interest that the Select Committee took the view that the fiscal stance that the Government had adopted over the past 12 months had somewhat slackened. The Tarzan approach of the Chancellor to the fiscal aspects of monetary constraints is thereby slightly knocked into a cocked hat.

The Select Committee's report, in the section entitled "The structure of the Economy" points out that the tax changes that have been made will have the effect of making investment more expensive at the margins. If that is the case, that will be seen historically to be a mistake. Alliance Members have the consolation of knowing that the TUC and the CBI confirm our view that there is a great need at the moment for an increase in public sector capital spending. Paragraph 55 of the report says that the President-elect of the CBI expressed the hope that the Budget would provide an opportunity to bring … about the reduction in what in industrial terms we call current expenditure and ensuring a bigger share of the total available for expenditure should go into the capital account". That view would find favour on both sides of the House and I regret that the Chancellor did not reflect it.

The Select Committee's report on the TUC's evidence is in a similar vein. It says that the TUC adopted a similar stance that increased public capital spending would help significantly to strengthen the industrial base. Interestingly enough it quoted the General Secretary of the TUC who said, I think somewhat reluctantly, On that particular issue, which I think is illustrative of a more general issue, the answer has to be yes, we do certainly think it is desirable"— that a joint approach could be made to the Government by the CBI and the TUC. We have had exchanges with the CBI within the overall NEDC context in terms of staking out new ground. We have differences about current expenditure but there are areas where we could jointly say to the Government 'This makes sense to both sides of industry.' I was interested to notice that Mr. Geoffrey Chandler, in the most recent "Three Banks Review", reinforces the view that is taken both by the TUC and the CBI. He went on to conclude that the political dog fight, the class based and adversarial politics that we have experienced in British industry since the last war, has done nothing at all t0 expedite growth and prosperity in Britain.

But the most damning indictment that the Select Committee has of the Budget strategy is based on the fact that it took the view—to which the right hon. Member for Worthing adverted—that there was no sustainable growth in his medium term financial strategy when one looks at the small print. That truth will dawn slowly in the cold light of morning over the coming weeks and months. That is an indictment of the Government's policy, because if it is true the prospects for unemployment are extremely bleak. The increase in productivity that we are experiencing, together with the decrease in growth that we shall experience over the medium term, will have dire consequences for unemployment. It is ridiculous that the Government have not done more in the Budget about the unacceptable level of unemployment in Britain.

One or two matters of detail have had an impact on me as a constituency Member as well as the Liberal spokesman on taxation. One is the impact of the increase in petrol prices and vehicle excise duty on rural areas. The Government must accept that although general indexation of some duties is right, the burden of some increases is unfair and discriminatory on those in rural areas.

I have had strong representations locally and nationally from building contructors who argue that the Government's proposal to levy VAT on building alterations will simply increase the black economy and put more construction workers, particularly in small firms, on the dole.

The imposition of VAT on takeaway food is especially mean. Parents in my constituency have told me that because of the cuts in the school meals service their children have only one hot meal a day, and it is a takeaway meal. Those kids will be penalised.

The Government's attempt to redress the anomaly on furnished holiday lets will compound some of the problems of those with self-catering units. Further changes will need to be made in Committee.

I accept that there are constraints imposed by the Committee stage procedure for the Finance Bill, but we shall be looking for a redress of the anomalies in the schedule B and schedule D taxation of forest land.

We shall also require much convincing that the changes proposed in life assurance matters are justified. There is consternation in the life offices in places such as Edinburgh, because their 37.5 per cent. special rate for corporation tax is the basis on which all their actuarial calculations have been made and if that rate is changed, the actuarial calculations for generations will go out the window. The life offices are worried about that and about the possibility that the Government will claw back premium relief on policies that have in-built changes, as opposed to those with discretionary elements written in.

We shall require a good deal of convincing that the tax clawback from those who work overseas is justified. It is a mean action against hard-working people who serve this country well, selling our goods abroad. I shall require much convincing that the abuses that the Government claim to have unearthed justify that change.

One of the most distressing aspects of the Budget is that the Chancellor discriminated implicitly against the elderly. It is unfair that he should have increased the tax allowances for single and married people by 12 per cent., but increased the age allowance by only an indexed 5.5 per cent. Age allowance has been about one third higher than the basic personal allowances, but in 1984–85 the difference will be reduced to about 25 per cent. Mr. David Hobman, the director of Age Concern, was quoted recently in The Times as saying: The Chancellor has done nothing at all in real terms for pensioners. Something should have been done to protect the incomes of those who have worked and saved to provide a little for themselves in retirement. If the Chancellor used the £450 million that he will lose from the reduction of stamp duty, he could increase pensions by 9 per cent. instead of by only 5.5 per cent. There is a widespread feeling that it is about time that the Government got round to abolishing the earnings rule for pensioners who earn more than £65 a week. That would cost £190 million. If that is too much, they could redress the anomaly which applies to the 225,000 retired women aged between 60 and 65 which would cost only £20 million. There is a glaring and indefensible omission of help for the elderly in the Budget.

The Chancellor's claims about how the poverty trap will be affected by the Budget have been proven false. The gilt has quickly been stripped off the gingerbread. The Low Pay Unit and others have shown clearly that, under the previous Chancellor, now the Foreign Secretary, the tax burden on the low-paid increased sharply, with the result that the number of families in the poverty trap more than doubled. The changes to personal allowances do nothing to begin to scrape the surface of that problem. Child benefit requires an increase of £1 a week in November rather than the 35p that we expect the Government to announce this May.

The tax threshold remains well below the accepted standard of poverty and will have only a slight impact on the poverty trap. In the absence of fundamental structural reforms of personal tax allowances, the increase in thresholds will be worth much more to the better-off. By "the better-off' I mean top earners with salaries of £50,000 who are to receive a tax cut of £600 a year, which is almost six times as much as will be received by the equivalent married couple on an average or low income. Only people with incomes above £18,000 a year, or £345 a week, will pay less in income tax and national insurance as a proportion of earnings as a result of Conservative government. That is an indictment of the Budget. That argument has been reinforced by a report of the Institute of Fiscal Studies which shows that the Chancellor's claims for his changes are wholly phoney.

We would have liked something to be done to stimulate private investment through share ownership schemes. That opportunity was missed and the Chancellor's scheme does not go anything like far enough. I recommend that he studies the details of the Monory scheme in France which are set out in the Investors Chronicle of 2 March and to which my hon. Friend the Member for Colne Valley (Mr. Wainwright) has drawn the Treasury's attention. That scheme would require the removal of stamp duty on share transfers and would offer tax incentives to make investment in shares as attractive as other forms of saving such as life assurance. The Monory scheme is well developed and could quite easily be adopted. That is a positive approach which my party has always supported. Again, the Chancellor has missed that opportunity.

The Government have sent up a smoke screen which has produced a false euphoric response in the financial sectors that are to be found within a 10-mile radius of London. If the Chancellor cares to struggle further north outside that radius, he will find that the view taken of the Budget is quite different. In the fullnes of time, I think that the canny assessment that has been made in the northern reaches of the country will prove to be right. We should have had a Budget that introduced a tax credit system, and was far more re-distributive in its effect, and it should have contained an accessions tax. All those opportunities were available to the Government.

We will oppose the Bill. It fails to re-distribute wealth, to encourage public investment, to encourage share ownership and to do anything for unemployment.

10.44 pm

Mr. Christopher Hawkins (High Peak)

I shall be brief, as I agreed, because I know that many hon. Members wish to speak, and the average length of speech has been rather long, thus depriving many hon. Members of the chance to speak.

Mr. Maxton

Is the hon. Gentleman aware that there is no time limit on the debate so that there is no reason why hon. Members should limit their speeches in any way?

Mr. Hawkins

I am aware that some hon. Members are under the illusion that there is no time limit. I am also aware that it is possible for the debate to be closured.

I welcome my right hon. Friend's concession in the Budget to the disabled. Unfortunately, some press reports, notably "Moneywise" in the Daily Mail, reported that customs and excise were interpreting the concession in a way much stricter than the impression given in the Budget speech. It was being interpreted far more strictly than the Chancellor intended. That would not be the first time that the interpretation of a measure that has passed through Parliament was stricter than Parliament intended.

Many hon. Members who are concerned about this matter tabled early-day motion 639, which has been signed by members of all parties. It welcomed what my right hon. Friend had announced for the disabled, and called on him to ensure that the concession was implemented as he intended, and as he had stated in the Budget. The motion said: That this House, having welcomed the Chancellor's statement that 'neither car tax nor value-added tax will apply to family cars designed for disabled people or substantially adapted for their use', notes with concern reports"— that is, the press reports in the Daily Mail and other papers— that Her Majesty's Customs and Excise propose to restrict the application of this exemption to vehicles that can accommodate a stretcher or a wheelchair and no more than five other people; and calls on the Chancellor to ensure that his Budget statement is implemented. That motion was signed by at least 40 hon. Members to my knowledge in the handwritten version. Unfortunately, somewhere in the Table Office, or at the printers, the wording of the motion changed. For that reason, I have withdrawn the motion, and I have asked for the right to speak to explain why I have done so.

I withdrew the motion because the wording was changed to give a quotation from the Chancellor suggesting that the Chancellor had said that neither VAT nor car tax would apply to cars registered for the disabled, whereas in fact the Chancellor said, "designed for the disabled" which the original handwritten version of the motion correctly stated. Unfortunately, some hon. Members may have signed the motion and been misled by the printed version, which is incorrect. I have therefore withdrawn it. The withdrawal of the motion does nor. in any way mean that the hon. Members who signed it do not agree with the motion as originally written. However, the printing error has led to confusion inside and outside the House. Those hon. Members who signed the motion still warmly welcome what the Chancellor has done, and are glad to learn that the concession that he gave in the Budget speech will be implemented exactly as he intended.

If there is a winding-up speech tonight, I invite my hon. Friend the Financial Secretary to the Treasury to elaborate on the concession, and to make it crystal clear to the press and public just what it amounts to. From the many signatures on early-day motion 369, my hon. Friend the Financial Secretary will know just how strongly hon. Members on both sides of the House support specific measures to help the disabled. We welcome what has been done. It may be relatively small, but it is a help, and it is welcome. I hope that my right hon. Friend the Chancellor will continue to search for further measures to help the disabled in his future Budgets.

I should like to make a brief personal point, which in no way involves others who have signed that early-day motion. I hope that my right hon. Friend the Chancellor will consider what concessions could be given to those who are seriously disabled but who can, with great difficulty and sometimes with a stick or other aid, walk a short distance, and who do not need a car that is specially adapted for a wheelchair or stretcher, and so do not benefit from the concession. I realise the difficulties. At the moment the concession relates to the vehicle rather than the person, and all sorts of administrative, technical problems are involved. However, I hope that my right hon. Friend the Chancellor and my hon. Friend the Financial Secretary—who may or may not be summing up—will consider that category of disabled people, who need a car in order to be mobile, but who do not gain from the concession.

10.52 pm

Mr. Brian Sedgemore (Hackney, South and Shoreditch)

I am one of those members of the Treasury and Civil Service Committee who considered the Budget. I think that it is the first time for several decades that that Select Committee's report has not been unanimous. I was unable to sign the report for the simple reason that the Budget is predicated on monetarist nonsense, and the report is also predicated on that nonsense. Paragraphs 13 to 18 of the draft that we considered were economic mumbo-jumbo, and in the published draft those same paragraphs— numbered 15 to 20—were also mumbo-jumbo. It is a matter of regret that the Select Committee was unable to accept an amendment proposing that those paragraphs should be deleted, which was supported by my hon. Friend the Member for Great Grimsby (Mr. Mitchell) and I. The amendment regretted the fact that the Chancellor completely misunderstood monetarist theory, and did not understand its painful consequences for our nation. The amendment went on to say that in the Chancellor's use of MO, M1, M2, PSL2, M3, narrow money, broad money, and narrow money redefined, he was reducing economics to a fantasy world.

We regretted the fact that the Chancellor did not accept the views of the Bank of England panel, which met on 28 October 1983. Some of the most eminent economists in Britain were present, together with the Chancellor's chief economic adviser, Sir Terence Burns. At that panel, it was conclusively shown, in a torrid attack on monetarism such as has rarely been seen in the academic world, that there was no empirical evidence to support monetarist theory or practice.

When we questioned the Chancellor, he could only sneer at the work of Professor Arthur Brown of Leeds university and at the brilliant analysis made by Professor David Hendry and Mr. Erickson from Nuffield college, which showed that the whole basis of monetarist theory was nonsense. It is not good enough for the Chancellor to go to a Select Committee and to view some of the most brilliant minds in our country and in our time with disdain and contempt instead of producing rational arguments. If he listened occasionally we could be better governed.

Mr. Christopher Hawkins

Economists in different camps throughout the world have argued about the effectiveness of monetarism in the short term and the effects that it will have on the economy. Few economists disagree that in the long run the basic tenets of monetarism can be upheld. The hon. Gentleman's arguments are mainly about short-term effects, but in the long term the link between money supply and prices is not disputed, even by most established Keynesians.

Mr. Sedgemore

With respect to the hon. Gentleman, who has intervened several times tonight, I do not think that he understands what he is talking about. I shall not dodge the issue. I do not intend to abuse the hon. Gentleman, but I intend—[Interruption.] I can stand here all night. There is no closure. I intend to deal in detail with the monetarist argument because it is central to the Bill.

Both the Chancellor and the Chief Secretary have said in recent months that they want to secure the best use of resources. They want efficiency, enterprise and competition. Let us assume that that is the right prescription for our economy. According to classical economic theory we shall not have the best use of resources, we shall not have efficiency, enterprise or competition if business is run by cartels and monopolies.

Normally the control of cartels and monopolies is exercised through the restrictive trade practices Acts. I submit that one can impose fiscal measures to encourage competition, and I shall table amendments to that effect if I am chosen to serve on the Committee. I shall propose a competition tax to encourage competition.

I shall describe the mischief which I shall try to cure through a competition tax. The matter arises from the way in which civil engineering companies compete, or do not compete, for contracts at home and abroad, and in particular from my considerable investigations into the way in which Cementation International has competed for a contract in Oman.

I shall first set out the procedure for the civil engineering industry involved in large contracts overseas. I have done a lot of work on the subject. I was in the Civil Service and I have checked my facts with former Secretaries of State for Trade and Industry. I shall be able to describe what the present Minister for Information Technology said. He blew the gaff on television.

Normally we do not achieve the best use of resources, efficiency or competition, but a cartel meets civil servants at the Department of Trade and Industry. It is not called a cartel, of course. It is just a group of individuals from the construction industry. They go to the Department, which hopes that they will decide on only one firm bidding for a large overseas contract. That helps the ambassadors in foreign countries, who have told me privately that they prefer only one company to bid because they can speak to the relevant Government Minister and wind him up.

If two companies compete, it is difficult for ambassadors to wind up the Minister, to tell him what to do, who to contact and what they want. If, when the cartel meets civil servants from the Department, it does not decide that only one firm will bid, the construction industry has an export group which acts as an inner cartel. It meets privately to try to decide that only one company should bid. If that fails, there is a further inner cartel that tries to give the contract to one firm.

What has caused concern about the Oman contract, which is why we need a competition tax, is that the cartel did not operate. Because of the way in which the Prime Minister responded to the contract, and because she met her son in Oman, the cartel was broken. That cartel was turned into a monopoly, whose beneficiary was Cementation International. It gained the contract without going through the cartel procedure.

I am not putting forward a speculative view; it comes from the heart of the Conservative party—construction companies willing to talk about it privately but not in public because they do not want the cartel arrangement to be made public, as I am doing now. They are complaining bitterly that it is all very well for Trafalgar House, Mr. Nigel Broackes and Lord Matthews to buy a knighthood or two, but it is different to buy a £300 million political favour.

I do not know whether that is a justified allegation, but that is what the companies complain about — [Interruption.] Someone says, "Shame". The civil engineering industry of this country is putting that forward. I am not so naive as to reveal my sources in the debate. Before this story is finished, all the facts will come out publicly.

The Minister for Information Technology has blown the gaff himself. He appeared on television when answers in the House were rather different from current answers. What he said justifies the need for a competition tax. He said: I will only say that the actual contract in question"— he was talking about the Oman contract— there was a single tender or a tender for a British company as it were. Now that is not at all unusual, in fact and in fact, in certain areas we try to ensure that only one British group tenders". Two British groups do not compete for the same business overseas when they have to fight against the Japanese or the French or the Italians or the Germans.

I do not know whether hon. Members realise the awesome significance of what I have said. The Minister is saying that British firms break the laws of the EEC when they compete overseas. Mr. Raymond Blackburn wrote to the Minister with responsibility for the Civil Service— who was present in the Chamber until quite recently—and complained about that. The Minister replied: Thank you very much for your letter of 21st February about comments made by Kenneth Baker in a recent television programme. Incidentally, he is Minister for Industry and Information Technology. Paul Channon is Minister for Trade. I find it difficult to believe that Kenneth Baker, who is a most experienced Minister, would announce some new policy in the way you describe". But that is precisely what he announced in the transcript from which I have quoted. Mr. Raymond Blackburn replied to the Minister. In a letter dated 8 March 1984 he said: I knew the facts in the first paragraph of your letter particularly as Chips Channon and I were friends, and I met Paul both at 5 Belgrave Square and at Kelvedon. He was a schoolboy, but I have naturally followed his career. Mr. Baker was treated as an important Trade Minister and fits that description. The letter continues: The wider implications are immeasurably more serious. If the 'certain areas' include EEC countries the policy is in breach of Article"— I think that there is a reference to article 85— of the Treaty of Rome. May I please be assured that the policy excludes EEC countries? You will remember, Mr. Deputy Speaker, that EEC countries were included. The letter adds: If not I shall with regret consider taking legal action for a declaration. Apparently, the Minister did not reply.

Where there are firms which sign overseas contracts in excess of £100 million, they should get a declaration from the person with whom they are signing the contract that states that there have been tenders, or a declaration saying why it was impossible to tender. This would be my competition policy. The Treasury, or the Department of Trade and Industry, would formulate rules setting out certain exceptions which might be allowed in certain circumstances. If the exceptions were not met and there had been no tendering, and if there were allegations of massive political favours or other allegations, a 5 per cent. competition tax would be charged. That would produce revenue of about £15 million in the Cementation case. Given the knowledge that I have of the contract, including the information that the bribes involved only £8 million, that would be an inducement for Cementation not to have entered into such a contract without proper tendering.

I want to discuss more generally the background to the Budget. I believe that the Finance Bill is fundamentally misconceived. I do not think that the Chancellor of the Exchequer has asked the right questions and therefore he cannot give us the right answers. He has ignored the fact that we have witnessed over the past decade the breakdown of the international monetary system. There are three basic ingredients of the breakdown which have led to this fundamentally useless Bill.

The first ingredient is that the nations of the Western world adopted the wrong response to the oil crisis of 1973. In a fit of desperation they deflated, and that was wrong. My second premise, which will be slightly more contentious, is that floating exchange rates and free trade no longer allow the countries of the Western world to return towards full employment. That has become institutionalised in the rules of GATT — the general agreement on tariffs and trade—and in the rules of the European Economic Community.

We are told that we are all Europeans now and psephologically that might be right, although volatile opinion polls seems to suggest differently. On occasions the Prime Minister seems to be more anti-European than I am.

Even if we stay in Europe, no illusory approach to economics will remove the fact that, in the end, Britain must plan its trade and match its imports with its experts. Whether we do or do not reach an agreement within the rules, the balance of payments problem, if there is to be sustained economic growth, will not go away.

My third point is more complicated. We have witnessed during the last decade the growth of monetarism, which predicates this Finance Bill and the whole of Conservative thinking since 1979. There are many versions of monetarism, and we should not try to score cheap political points over them.

The first definition of monetarism is the old Fisher eqation, which most people know, that MV =PT, whereby M is defined as the amount of money, V as the velocity of the circulation of money, P as the price level and T as the number of transactions. If that were monetarism, I would say that we were all monetarists now because that is a definition, an equation, and the equation cannot be wrong because the terms are defined in such a way that one side must equal the other.

The problem comes if one takes it a little further and seeks to argue that money GDP, which PT, is caused by the amount of money in the economy. Difficulty arises when one switches V from one side of the equation to the other, so that M=PT/V. The monetarists go on to argue that it is really M=PT, as one can ignore V because it is either stable or predictable. When I questioned the Chancellor on this very point during the proceedings of the Treasury Select Committee and asked him whether it was stable or predictable, he replied that one could predict trend velocity. However—I invite hon. Members to interrupt me if I am wrong—I have seen no evidence that V is predictable or that one can reliably predict trend velocity, and certainly there is no evidence that it is stable.

I am a modest man and I hesitate to quote myself, but if one really wants to know whether V is stable or predictable one would do well to peruse a booklet written by me entitled, "The How and Why of Socialism" The relevant short paragraph—I doubt whether there will be any conflict about this, because it is a statistical analysis run through the Cambridge computer on my behalf— says: The notion that V (the velocity of the circulation of money) is constant—or even approximately constant—can readily be shown to be false. Since 1965, for example, the income velocity of circulation (the money value of GDP divided by the sterling money stock [M3]) has fluctuated from a high of 3.3 in 1970 to a low of 2.6 in 1973—a difference of 25 per cent. In other words, the prediction of GDP from knowledge of the money supply alone is subject to that degree of error. Equally action taken by the authorities to expand or contract the money supply has an unprecise effect on GDP, let alone on price inflation, unless V can be forecast with some accuracy. Thus, for example, the expansion of money supply by 25 per cent. in 1972 and 24 per cent. in 1973 was offset by a big fall in V in both years, while the relatively small increases in M3 in 1975 and 1976 were associated with relatively large increases in V". I have set out a table that demonstrates that point. I shall quote just one more sentence, as I know that you, Mr. Deputy Speaker, are not keen on long quotations. My booklet states: This suggests that there is some tendency for fluctuations in V to be the agent which enables the money supply to accommodate a given growth in GDP, the latter being determined by factors other than the Government's policy towards M3.

Mr. Alan Howarth (Stratford-on-Avon)

Will the hon. Gentleman kindly turn to the page in his interesting treatise in which he disposes of the argument advanced by Phelps, Brown and Hopkins in 1956 that 95.9 per cent. of the price rises in southern England between 1281 and 1981 occurred in the period following 1936 when Keynes published his general theory?

Mr. Sedgemore

I think that the hon. Gentleman should read my article on 4 May 1974 in Tribune which dealt with all the years when we had a gold standard and the relationship between stable money and a stable gold supply. My article showed up all the problems that arose. In discussing the value of monetarism, one can talk about its effect on inflation and on unemployment. That is critical to the Chancellor's Budget strategy. I shall return to the argument advanced by Professor Brown, Hendry and Erickson.

It has been said that monetarism implies that M3 causes inflation. The problem is that, unless the banks can charge different interest rates from those charged by other institutions, it is theoretically and practically impossible for M3 to cause inflation. It has been said also that the public sector borrowing requirement causes inflation or causes M3. That is a theoretical impossibility unless there are differenial interest rates.

Mr. Peter Jay, who used to write for The Times, said that inflation was caused by public sector expenditure, but that is nonsense and he was forced to retract that statement. The former editor of The Times, Sir William Rees-Mogg, said that there was something inherent in the scriptures of both Judaism and Christianity which suggested that countries needed stable money and that that could be achieved only through the gold standard. That was the reason why I wrote my article, which corrects the misapprehension of the hon. Member for Stratford-on-Avon (Mr. Howarth).

We do not need to go back to those ancient authorities and to people such as Mr. Peter Jay and Sir William Rees-Mogg, who might be considered as excessive Socialist sympathisers of yesteryear, to support our attack on the Chancellor's broad economic strategy in the Budget. We can examine "Origins of the Monetarist fallacy—The Legacy of Gold" by Roger Bootle. He is the chief economist of Capel-Cure Myers and not a radical Socialist. He said that the problem faced by the Chancellor and the House started in 1956 with a statement by Professor Milton Friedman, who said: there is perhaps no other empirical relation in economics that has been observed to recur so uniformly under so wide a variety of circumstances as the relation between substantial changes over short periods in the stock of money and in prices; the one is invariably linked with the other and is in the same direction; this uniformity is, I suspect, of the same order as many of the uniformities that form the basis of the physical sciences. There has been a great deal of statistical analysis since then. It shows that that statement is not just empirically false but it bears no relationship that has been observed to the physical science. It was a seminal statement that hit the Western world as much as Keynes's general theory and far more than anything that Karl Marx had said years before.

That seminal statement was quickly taken up by the academic world. It succumbed; and shortly after the media, political parties, officials who worked for the Government, and then Governments, succumbed. Then came the 1973 oil crisis and terrified bankers, officials and Governments around the world stretched out for something on which to hang. The only thing that appeared to be present was monetarism. That is where we come to the sedentary intervention of the hon. Member for Stratford-on-Avon who correctly said that I had the date wrong. Of course, I had. In 1975, the then Labour Government started to produce the first of the monetarist Budgets. The important point about the analysis—I again questioned the Chancellor about it in the Select Committee on the Treasury and Civil Service — is that Roger Bootle observes that no one is able satisfactorily to define the concept of 'the money supply' in theory, let alone identify it in practice. Indeed, the basic concept of the money supply is meaningless.

Roger Bootle says that the problem comes from the fact that we have confused commodity money with credit money. Of course, the gold standard provided commodity money. Commodity money is liquid. In his document, which was presented at a lecture recently because it was thought to be important in relation to the impending Budget, he said: (a) it represents immediately available purchasing power; ….(b) it carries no credit risk; (c) it pays no interest; (d) together, these characteristics make it capital certain. Credit money is not the same kind of money. It is nonsense to start arguing on the basis of commodity money and credit money. He said that credit money may be illiquid. (a) bank money may not represent readily available purchasing power … (b) it carries a credit risk (the risk of bank default); (c) it may pay interest; (d) because of the above, it may be capital-uncertain (as with certificates of deposit). Roger Bootle goes on to argue from that, and I agree with him, that we should pay less attention to the monetary aggregates and more to price variables—the exchange rate, rates of interest and the structure of rates of interest.

I should argue—I believe it is one of the answers to the question that the hon. Member for Stratford-on-Avon raised — that over the long term, if one studies the relationship between the money supply and inflation, one finds that they can be stuck on graphs and be shown to be going in the same direction but they tell us nothing about cause and effect.

The fundamental problem that Professor Friedman has faced — even if his statistics were right, and in a moment I shall show that they were not—is that he never proved the cause and effect. That has bedevilled the argument for a long time.

If there are those who are wont to believe in the arithmetic of monetarism and the arithmetic that the Government have used, I would refer them to the document, "The Failure of Monetarism" by Christopher Johnson. He is not exactly a radical Socialist; he is the group economic adviser of Lloyds Bank. This document is dated December 1982. Christopher Johnson, who is, I believe, one of the advisers to the Treasury and Civil Committee, in one of his more important paragraphs writes— enormous double figure rises in sterling M3 in the last four years, "— given the date of the document, that was the period from 1978 to 1982— followed by a dramatic fall in the inflation rate, should be enough to disprove the simple St. Louis model once and for all. I hope that the Financial Secretary to the Treasury, when he replies, will accept that we have disproved the St. Louis model once and for all or, if he believes that we have not disproved it, will say on what basis the model can still stand.

Christopher Johnson goes on to say: Failure in controlling money has been rewarded by success in bringing down inflation, and it seems unlikely that the two are connected. If anyone is tempted by this to switch the horse he is backing to monetary base or sterling M1, he should be reminded of how the rapid growth of these narrow aggregates in 1975–77"— something I referred to in my document— was also followed by a dramatic fall in the inflation rate in 1978. He sets out the evidence in a table at the end.

Mr. Nigel Forman (Carshalton and Wallington)

I have been listening carefully to the hon. Gentleman. If he is so against the theory of monetarism and if he made this clear as early as 1974, as he said earlier, how was it that he remained a parlimentary private secretary in the Labour Government for all those years and did not resign?

Mr. Sedgemore

There is a truthful answer and a bogus answer. The truthful answer, as the hon. Member knows, is that politics is a series of messy compromises. The other answer is that there was some advantage in being inside the system and getting the kind of information which one could subsequently leak, which ultimately led to my being sacked by the then Prime Minister. I hope that that satisfies the hon. Member. That is as plain as I can put it.

The more interesting statement by Christopher Johnson, group economic adviser to Lloyds Bank — again it is something I put to the Chancellor when we were questioning him although one would not think so when one reads the Treasury report— is that there has been an enormous price to pay for monetarism. By inference I think we are entitled to say that there will continue to be an enormous price to be paid for monetarism. Basically the price that has to be paid is lost output, lost income and high unemployment. He put it very succinctly, and I shall quote just this short paragraph: Monetary policy has not achieved its targets for the growth of the money stock, but it has, by means of high interest rates, led to recession, and thus to a lower demand for labour, of which rising unemployment is the main indicator. Each one percentage point increase in unemployment has led to about two percentage points off wage inflation, which has in its turn slowed down price inflation. This corresponded"— this is the critical point— to a sacrifice of about 2 per cent. in GDP in 1980, and again in 1981. If we pause to reflect on that, we see that it is an astonishing sacrifice that the whole nation should on average be 4 per cent. worse off simply because the Chancellor is obsessed with a series of monetary and financial targets which have no logical base.

The hon. Member for Carshalton and Wallington (Mr. Forman) has encouraged me to quote from the last torrid attack on monetarism that came in October when a Bank of England panel met to discuss two very important papers which the House would be unwise to ignore. There is a list of economists which I shall not take up the time of the House to read out; it is an important group of economists. At the beginning one of the participants tried to define monetarism in language which everyone could understand by saying: Money causes prices. Money does not cause output. Nothing else causes prices or output. There then follows a fairly orthodox economic paper by Professor Arthur Brown, using fairly orthodox economic techniques. He was examining the book by Friedman and Schwartz on monetary trends in the United Kingdom— the work on which the whole theory is based. At the end of his argument, Professor Brown asked one question: do Friedman and Schwartz make their case that United Kingdom experience supports a simple quantity theory, with money supply controlling prices and output controlled by other factors entirely? He answered it thus: "In a word, no".

Then we have the paper of Professor David Hendry and Mr. Erickson of Nuffield College. Theirs is a paper which uses entirely different and highly sophisticated economic techniques. It says that, in effect, Professor Friedman actually cooked the books. One of the basic ways in which he did that was by averaging out the data, and in doing so he distorted it. The same evidence that Professor Friedman has used to support his theories can be used to discredit them. Professor Hendry concluded with perhaps one of the most modest remarkable statements ever made by academics, who are very loth to use anything other than the most language. He said: We actually believe that there is a need to take the 'con' out of economics. What we have witnessed over the past decade, and what has made our country so poor, is an academic con trick. The bulk of the rest of the world has given up that academic con trick, but somehow the monetarist experiment still continues in Britain, although it is here that the evidence is strongest in disproving that experiment.

I said that there were three factors in the breakdown of the international monetary system: the response to the oil crisis in 1973; the floating exchange rates and free trade no longer enabling the countries of the Western world to return towards full employment; and the acceptance of monetarist doctrine in our society. But we have to add to those three factors three others which are still present and which have contributed to the long-term economic decline of our country, which the Chancellor and the Government refuse to recognise.

First, we lost an empire and we lost privileged markets.

Secondly, until very recently we have conducted our economy in a way which favours commercial and City enterprises rather than industrial enterprises. Until very recently we have always had to sustain interest rates which have been above those in many other countries, in order to attract hot money to Britain.

Thirdly, there has been the persistent failure—it still persists—of governments and trade unions to respond to the way in which capital can be moved about the world by transnational companies. I have tried to avoid jargon in my speech, but the effect is that capital basically dominates labour rather than capital working for labour.

Fourthly, our country suffers—and I see nothing in the Budget or the Finance Bill to deal with the matter— from the industrial consequences of our being a manufacturing nation which despises its manufacturing base. I have always thought that there were two reflections of that; indeed, I am a victim of one of them myself. The first is that people who go to Oxford and Cambridge, instead of getting out and working as plant managers in industry, tend to go into the Civil Service. That has distorted the kind of value that we have got out of our university system.

That is mirrored exactly at another level. When I was Member of Parliament for Luton, West, young people were always encouraged to enter local government or to become bank clerks rather than to become fitters in industry. I do not know why; there cannot conceivably be the same job satisfaction in being a bank or insurance clerk as there is in being a fitter in industry. Those parallel measures have damaged our economy. If we add the three basic reasons for the breakdown of the international monetary system and those four basic reasons for long-term decline—each hon. Member can add others—to what has happened in the post-war years, we can begin to see the problem that must be solved. Until we see it, we cannot get a Finance Bill to solve it.

Since the war, the booms have become smaller, and the slumps deeper, and each time we have started from a base of much higher unemployment. Each time we start from that higher base it will more difficult to get out of each succeeding slump. Manufacturing industry especially has taken a series of ferocious knocks. Since 1979 the decline has been awesome; indeed, from 1979 to 1981 the decline in manufacturing output, employment and investment was greater than the decline between 1929 and 1931.

The Financial Times recently reported the Chancellor as saying that everything would be all right. Although some people were saying that when the oil ran out, we could not sustain our growth, and that, because we would get into balance of payments problems if we tried to achieve economic growth, there would be 5 million or 6 million unemployed, instead of 3 million or 4 million, the Chancellor said that that was wrong. He said that our large overseas investments would make up for the losses in oil revenue. But no one in his right mind who has studied the proportions of profits remitted to the United Kingdom can believe that, in the 1990s, those remittances will make up for the phenomenal loss of oil revenues. We must sustain a manufacturing base, because the bulk of our exports is in finished manufactured goods, although for the first time in 1983 we became net importers of finished manufactured goods. We must sustain exports in order to pay for our imported food and raw materials.

What sort of Finance Bill should we have had? First, we should have had a Budget, a Finance Bill and a balance of revenue and expenditure that involved the injection of more money into the economy. To use the Prime Minister's crude shopkeeping terms, we should have borrowed more. The Prime Minister believes that borrowing is an original sin; she says that it is wrong to earn a pound but to spend a pound and a penny. That sounds good on television, and it may be the way to run a shop in Grantham——

Mr. Allan Roberts (Bootle)

Is that not one thing which the Prime Minister has in common with the Militant Tendency, which is also opposed to borrowing?

Mr. Sedgemore

I am sure that the Prime Minister has much in common with the Militant Tendency, but since I am much more delicate than is my hon. Friend the Member for Bootle (Mr. Roberts) I shall not refer to it.

Of all the people on the earth, who is the Prime Minister of the United Kingdom since 1979 to lecture us on borrowing? During the four years after 1979, according to figures supplied in Hansard, the Government borrowed just over £40 billion. No other Government in peace time has borrowed so much money in a four-year period. It is rather like an alcoholic lecturing a teetotaller on the virtues of abstinence.

At the general election the Prime Minister constantly told the public that if only we behaved in a fiscally wise fashion and borrowed less we could be as prosperous as the more advanced countries of the Western world. That is a very odd statement for the present Prime Minister to make.

Mr. Doug Hoyle (Warrington, North)

Does my hon. Friend agree that it is very bad business even for a small shopkeeper or someone with the mind of one to use North sea oil revenues, which should be used for the future success of the economy, to pay unemployment benefit? Is that not a waste?

Mr. Sedgemore

My hon. Friend is absolutely right. Indeed, way back in 1977, my right hon. Friend the Member for Chesterfield (Mr. Benn), then Secretary of State for Energy, proposed the setting up of a separate North sea oil fund to help investment in manufacturing industry, the development of public services and the infrastructure of the public sector. The notion was cleared by the Public Expenditure Survey Committee and by the Public Accounts Committee as involving no technical difficulties, but it was slated in the press and disliked by the then Prime Minister and Chancellor of the Exchequer. When the right hon. Member for Glasgow, Hillhead (Mr. Jenkins), who went to Europe, made exactly the same proposal five years later, everyone hailed it as the most brilliant proposal ever. One just cannot win in these arguments.

If one ignores the public sector borrowing requirement and compares the Government deficits of the various Western countries one can see how much each nation borrows. If I understand the Prime Minister aright—if I am wrong, no doubt I shall be corrected—the deficits of the various Western countries for 1982, as a percentage of nominal GDP, were 2 per cent. for Great Britain, 4.1 per cent. for Germany, 3.7 per cent. for the United States, 3.3 per cent. for Japan and 2.9 per cent. for France. Astonishing though it may seem, therefore, all those countries are doing exactly what the Prime Minister told the electorate it was utterly irresponsible for the Labour party to propose for this country. When the Government wind up the debate—tomorrow morning, the day after, or whenever — I hope that we shall be given an explanation of that dilemma as it worries all Opposition Members and a number of Conservative Members. Indeed, various Conservative Members have expressed concern in the House on previous occasions, including the right hon. Member for Old Bexley and Sidcup (Mr. Heath) and other right hon. Members below the Gangway.

The second suggestion that was pooh-poohed by the Conservatives when it was made by my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) is that there should be a modest depreciation of the pound to make our exports more competitive. I am never sure — perhaps the Minister will intervene and tell me—whether the Government have an exchange rate policy. To judge from answers given to the Select Committee by Treasury officials, there is an upper and a lower limit, the one concerned with recession and the other with inflation. That suggests that the idea of an exchange rate policy rather than a completely free market attitude is accepted by Treasury officials and even, in extremis, by the Government.

The more difficult and contentious point is about trade planning. No country can permanently import more than it exports unless it has infinite reserves, and as no country does, no country can. Therefore, we need various forms of trade planning such as import substitution, and, I submit, straightforward import duties or tariffs. Call it protectionism if one likes. It has been said that that policy is not viable because there would be retaliation, but those who argue that must look at the structure of the goods that we are likely to import and export and the countries and the balance of the deficits between those countries, and say how the surplus countries could win a trade war if, indeed, such a war—I would regret it—were to take place.

We should not be heading towards trade wars. The international monetary system has broken down and we need to look both to the advanced countries of the western world and to the Third-world countries for some new form of Bretton Woods agreement, to use the old jargon. We need a completely different mechanism for controlling the relationship between states. It is simple to conceive of simple models, but it is more difficult to get Governments to agree to them. It is perfectly feasible to conceive of dividing the world into surplus countries, advanced surplus countries, into countries such as Britain which, if they went for sustained economic growth would have deficits, and into Third-world countries. Each block could impose import controls or plan its trade, first, in so far as it is moving towards full employment—if it gets there it cannot do it any more—and, secondly, in so far as it does not damage the block below it.

Eventually one gets a system that is mathematically possible. For any level of demand there is a restriction of trade, but overall there is more trade. If only Conservative Members and the Chancellor could grasp that simple mathematical model and then go to our European partners and to other countries and start to work out new criteria for the western world to achieve economic growth and — I do not want to go into this — new relationships between the advanced countries of the western world and the Third world, we might eventually see some more economic growth — [Interruption.] An hon. Member might think that it is drivel but I hope that he will have the opportunity——

Mr. Stuart Holland (Vauxhall)

I am sure that the House is touched by my hon. Friend's restraint in not wishing to go into the subject of developed and less developed countries. Despite various comments, does he agree that it is striking that if developed countries— members of the OECD—were to give 0.7 per cent. GDP in aid, it has been estimated that that would create 2 million jobs in the OECD countries?

Mr. Deputy Speaker (Mr. Paul Dean)

Order. I hope that the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) will resist the temptation to stray. We are dealing with the Finance Bill, which deals with taxation.

Mr. Sedgemore

I hope, Mr. Deputy Speaker, that you will let me sneak in the one comment that no one is better qualified to make that comment than my hon. Friend the Member for Vauxhall (Mr. Holland) and that when he sits on the Government Front Bench the world will be a much better place.

The Chief Secretary to the Treasury in opening the debate today said that public expenditure would be curtailed. That relates to the fiscal stance which is set out in table 2.2 of the Financial Statement and Budget Report 1984–85. I am sure that you will have read it, like the rest of us, Mr. Deputy Speaker. It is an extraordinarily restrictive fiscal stance. It has a PSBR of £10 billion for 1983–84—the financial year that has just passed—and of £7 billion for each subsequent year up to 1988–89. One of my hon. Friends may well care to comment on that strange obeisance to the figure of £7 billion year after year. It is a slowly tightening fiscal stance. If that fiscal stance is combined with the savagely diminishing ranges of monetary targets set out in table 2.2 of the Financial Statement, which defines narrow money, which is MO, and broad money, which is M3 — narrow money is supposed to control interest rates and broad money is supposed to control the PSBR—one sees a genuine monetarist policy. I am surprised to hear people saying that they do not believe that the Chancellor is still a monetarist.

One of the justifications that the right hon. Gentleman claims for his monetarist stance—this came up when he was questioned by the Select Committee — is that it conditions expectations, as, apparently, does M3. I ask the House to consider what that means. If it means anything, it is that M3 conditions wage demands.

I went into Marks and Spencer's and Sainsbury's in Hackney this morning and spoke to some of the shop assistants and customers to test that theory. None of them talked about M3. I visited a group of co-operatives later and, again, no one there seemed to be terrified by M3. It is like an horrific nightmare, yet it is the basis of the economy and the basis on which the Chancellor is asking wage earners to allow his package to be successful. It is claimed that if wages are excessive, the whole package will fall apart.

It is like a nightmare version of "The Rag Trade". If a shop steward in the rag trade—in Hackney, it would be a woman— says to the employer, "We want a 9 per cent. wage rise," the employer will say, "Nine per cent? But surely you have read the seasonally and provisionally adjusted monthly figure for M3 in the Bank of England Quarterly Bulletin." The shop steward will ask, "What is it?" and when the employer says, "It is 0.6345," she will say, "It can't be! If it is 0.6345, we are over the target range for the year."

Is that the new monetarism? Is this the most advanced and sophisticated monetarist theory?

Mr. Dennis Skinner (Bolsover)

Is it not likely that when that idea was put to the shop steward, she said, "Never mind about that. What I want is the same as what that Selwyn Gummer got — £5,000 extra for doing nowt."?

Mr. Sedgemore

That seems to be a valid economic point. It is far more likely that that sort of relationship will strike a chord with working people than would looking at M3 as a condition of their expectations. The Chancellor had the temerity to sit in a Committee Room and inform some of the wisest hon. Members—I exclude myself— that that is what economics is all about.

The Chief Secretary mentioned cuts in public expenditure. One area where we can seek to encourage public expenditure is local government. The Treasury argues that local government expenditure is out of control. As is the case with so many of the arguments that we have been discussing, there appears to be no empirical evidence for that assertion. It is beginning to make argument impossible for the Opposition. It appears that the Government can put forward a theory and a practice, but they do not have to adduce any evidence for it. [Interruption.] The hon. Member for Cambridge (Mr. Rhodes James), who uses the distinguished and elegant language of the modern historian, has just referred to me as an idiot. I do not mind that, because I could scribble the hon. Gentleman's knowledge of economics on one fingernail. I shall ignore——

Mr. Robert Rhodes James (Cambridge)

I beg to move, That the Question be now put.

Mr. Deputy Speaker

The hon. Gentleman cannot do that at this moment.

Mr. Sedgemore

That just shows how vicious, nasty little spite can somehow intervene in our debates. [Interruption.] I believe that I am being threatened, in a parliamentary way, by this pipsqueak opposite me. There should be some order in the House. The hon. Member for Cambridge would do well to go and have a quiet cup of tea in the Tea Room and we can all be good friends tomorrow when it is all over.

I am concerned with a serious economic point. We should get back to statistical analysis, although I do not expect all hon. Members to understand it. Local government expenditure as a proportion of gross national product has been almost constant in the past 15 to 20 years. Local government expenditure as a proportion of gross domestic product in the past four or five years has also been almost constant. It has varied between 12.9 per cent., 13.4 per cent., and 12.3 per cent. of GDP. That is not evidence of massive overspending. The Opposition must therefore recognise that if we are to start to move back to full employment, we cannot expect to recreate all the jobs in manufacturing industry which we have lost, even though we must sustain a strong manufacturing base and encourage investment in manufacturing. We must therefore be prepared to create jobs in the Health Service, the social services, education and public sector leisure services.

That must be a deliberate policy objective. It could create jobs and enhance the quality of life. Because it would help stimulate demand, it would encourage economic growth, increase income and stimulate employment. Some people have said that we do not have the money to become a full employment economy again. It was implicit in the Chief Secretary's speech that there must be big cuts in public expenditure. It is argued that we do not have the money to carry out the programmes that Opposition Members argue for.

Mr. Hoyle

My hon. Friend is developing an important point. Does he agree that it is not money but the will that is lacking? Britain is extremely wealthy. We are the only European country that is self-sufficient in energy especially oil. The revenues that accrue to the Government are unique in Europe, so it is really the will for full employment that is lacking.

Mr. Sedgemore

My hon. Friend is partly right. It is a pity that we have used our North sea oil revenues on consumption in the past two or three years, and that we shall continue to do that. That action is burning up vital capital for the country, just as we waste assets if we sell them off.

There might be many problems with the Labour party's economic programme, but the one problem that does not exist is finance. Massive under-used resources such as empty factories and people out of work mean that the problem is not one of finance. I have already referred in my short speech to the fact that we can borrow more, but all right hon. and hon. Members know that we can save money if we put people back to work instead of paying them not to work.

We have specific figures on this. Mukherjee, the Indian economist, developed the figures and presented them to the Treasury about 10 years ago, and, to the best of my knowledge and belief, they are accepted by the Treasury. Those figures suggest that every person out of work costs the Exchequer £6,000 per annum. That is a large amount of money, if 3 or 4 million people are out of work. That figure—it is broadly accepted that the House of Lords inquiry used the figure of £5,000 per annum, and the Members of the House of Lords are not all radical Socialists — is made up of unemployment benefit, redundancy payments and lost taxes.

Mr. David Winnick (Walsall, North)

Is my hon. Friend aware that in the interview last night the right hon. Lady the Prime Minister denied that unemployment was costing the country £15 billion? She said that it was costing £6 billion, and obviously she was working on the direct cost of unemployment benefits and supplementary benefit. Would my hon. Friend not agree that it is important— the Prime Minister deliberately refused to acknowledge this — to take into account the revenue loss to the Treasury? Thus, when we said during the last election campaign that the total cost was £15 billion, we were right, and the Prime Minister was misleading the country with what she said yesterday.

Mr. Sedgemore

I am grateful for that intervention, because it puts in a nutshell what I was explaining slightly laboriously. The only dispute between us is the figure of £15 billion. I have been discussing this figure with the economic adviser to the current leader of the Labour party, Henry Neuberger, who is one of my constituents, and he is tempted to put the figure slightly higher. As he is a professional economist, I am tempted to accept his slightly higher figure. There are, therefore, billions of pounds to be saved by putting people back to work. That would fundamentally affect the structure of the Finance Bill.

As the House has heard, the Finance Bill helps the better-off in society in a variety of ways. When the Chief Secretary of the Treasury opened the debate, we heard an esoteric argument about child benefit and its effect on the poverty trap, and on poverty. Whatever is the effect on the poverty trap of not raising child benefit by more than the rate of inflation, there can be no doubt about its effect on poverty in the country. When the Chancellor predicates 3 per cent. economic growth in the country, he should surely seek to secure that a large part of that economic growth goes to those who are worse off. There are better ways of distributing that money than by raising the tax threshold.

If income is to be redistributed a massive review of the welfare state is needed. Indeed, a massive review of the two welfare states in the country is needed. One welfare state is composed of supplementary benefits, child benefit and housing benefit. The other welfare state—I am glad to see that the Chancellor has acted in one respect—is composed of tax relief, life assurance policies, tax relief on mortgages, the abolition of capital taxes on houses, and the way in which university grants and so on in the education system are distributed. We must give consideration to that second welfare state. On analysis of the figures, one finds that someone earning £15,000 a year gets more out of our welfare state than someone earning £7,000 a year. That cannot be right. We must give consideration to that second welfare state.

We shall become a banana republic without bananas, and a backward fractious island off the coast of north-west Europe, with a culture in irreversible decline if monetarism remains the main thread of Britain's economic policy. When the Minister winds up the debate some time tomorrow, I hope that he will either seek to sustain the Government's monetarist argument, or drop it.

12.7 am

Mr. Eric Cockeram (Ludlow)

I intend to return to the subject of this debate—if I can remember what it is. I certainly do not intend to follow up all the points raised by the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore). Suffice it to say that he covered a wide range of subjects, but that the one thing that he did not display was anyy sense of modesty. He clearly had his own self-opinionated answers to all the problems of this country, Europe, and the rest of the world. He quoted extensively from his own writings. I always think that it is a sign of a third-rate self-appointed economist if he has to quote his own writings in support of his own views. However, he established his own level in this House when he told us that he disagreed with the policy of the previous Labour Government, but stayed on as a parliamentary private secretary because he could then obtain inside information. He later leaked that information and was sacked. The House will form its own judgment of that particular contribution.

However, I welcome the Bill. It was welcomed in the country last month, when my right hon. Friend the Chancellor presented his Budget. It will no doubt be further welcomed next month, when some 20 million workers and taxpayers get a tax refund in their pay packets and pay less tax in subsequent weeks. The raising of the tax threshold by 12.5 per cent. was a bold gesture, but this Budget will primarily be remembered because the Chancellor abolished two specific taxes—the investment income surcharge and the national insurance surcharge.

It is perhaps significant that the national insurance surcharge — that tax on jobs — was introduced by a Labour Government and abolished by a Conservative Government. I cast my mind back 12 years, to the last time that any Chancellor totally abolished two whole methods of taxation. It was, of course, a Conservative Chancellor who last did that, in 1972, when Mr. Barber— now Lord Barber — abolished purchase tax and selective employment tax. History has repeated itself, because the selective employment tax was a tax on jobs that was introduced by a 1960 Labour Government, and abolished by a 1970 Conservative Government. In this Budget the national insurance surcharge, a tax on jobs introduced by a 1970 Labour Government, has been abolished by a 1980s Conservative Government.

I am concerned about the tax that the Chancellor has introduced on bank interest, which is similar to building society taxation. I believe that the Chancellor has not properly thought it through. At present all bank interest is subject to tax from those who are liable to taxation. However, it is not subject to income tax from those who are not liable for such taxation. Under clause 27, those who are not subject to income tax will nevertheless have to pay composite rate tax on bank interest in future, including children, pensioners and others on low incomes. I find it difficult to accept that as being Conservative policy.

I note that national savings are exempted from that particular tax. Tax is paid gross on, for example, interest on a Post Office savings bank account. That is an anomaly. I note also that the Chancellor has exempted from taxation at source bank deposits of £50,000 or more which the Bill describes as deposits with a licensed deposit taker". In layman's terms, that is a bank. Tax has to be paid in arrears, but it is not deducted prior to the payment of interest on the deposit.

It is an anomaly that those who make large deposits with banks do not have tax deducted at source, but that those who make small deposits at banks do even when people making small deposits would not otherwise be subject to income tax. That is difficult to accept from a Chancellor who preaches the doctrine of fiscal neutrality, to which I subscribe. I support a Government who believe that the private sector should be encouraged and not put at a disadvantage compared with the public sector.

The trustees savings bank is a classic example of a bank which takes deposits from children, pensioners and people on low incomes from whom tax will, in future, be deducted.

I thank Treasury Ministers for correcting an anomaly which is dealt with in clause 43 concerning corporation tax and trustee savings banks. The provision is backdated to 1982. Trustee savings banks suffered unfair taxation compared with their competitors, the clearing banks. I thank the Chancellor for acknowledging and correcting an injustice. I hope that he will bear in mind what I have said about taxing those on low incomes. The Treasury has not properly thought through the consequences of that proposal.

12.13 am

Mr. Austin Mitchell (Great Grimsby)

It would be rash and impetuous to rush in to follow the hon. Member for Ludlow (Mr. Cockeram) in his praise of the Budget. There is no need for any of us to praise the Budget, or this enormously long Finance Bill. It must be the longest Finance Bill in recent years or decades.

There is no need to praise it, because the Chancellor himself has been so lavish in praise of his own creation. Lawson's law on budgets will come into operation. It is that the more lavish the praise of the Budget at the time, the longer the dying whimper of the Finance Bill and the more quickly it is forgotten.

The transformation of the Budget into the Finance Bill has been grossly overpraised by the Chancellor and by his minions in the press, which seem to wait on his every cue. The previous Chancellor was modest, which was appropriate in the circumstances. This Chancellor is extravagant in praise of his creations.

My most vivid memory of that self-esteem is of January 1981 and the famous Zurich speech at the height of the self-generated depression and the acceleration of unemployment in which the Chancellor said that he was not trying to pretend that the Government's record was one of unalloyed success. That is the most modest praise that the Chancellor has uttered. There has been a positive son et lumiere about this Finance Bill.

The Chancellor has changed his approach. My right hon. Friend the Member for Leeds, East (Mr. Healey) said that the efforts of the previous Chancellor could be compared with being savaged by a dead sheep. This Budget is like being butted by an opinionated goat. Both methods are irrelevant to our economic position.

I take issue with my hon. Friend the Member for Hackney, South and Shoreditch on the role played by monetarism in the Budget. The Chancellor set out to make an intellectual contribution to monetarism, especially in his Zurich speech. His contribution to theory is to make it up as he goes along, rather than following the text and authority in any strict way.

In the Budget, the Chancellor is walking away backwards from the monetarist commitment during the early part of the Government's term of office. It is not so much a monetarist Budget as a conservative Budget— small thinking, short-sighted, largely irrelevant to the real problems of the country and concentrating on shifting deckchairs on the Titanic.

We can see that shift in a whole range of ways. For example, there is a shift away from M3 with the introduction of MO. That is an appropriate measure of money supply for a Government who are concentrating on bashing the workers. It measures the spending power of the working class in cash, as many of them do not have the bank accounts or credit cards that add to the inflationary pressures in our society. The Government will keep MO within narrow limits. They will increase unemployment to keep down the purchasing power of the working class.

That measure has been combined with a cocktail of measures that are an enormous escape from the essential folly of the concentration on M3 in earlier Budgets. It is a cocktail of M3, M1 and PFL2 which, although no longer used, is a part of the Government's calculations. Those are measures of the economy, and people talk of little else in wage negotiations in Grimsby. If they are intended to condition expectation, it is difficult to envisage what insight the Chancellor has into the minds of the people who, he hopes, will be influenced by measures that have failed and which he has failed to observe. At least there is not the earlier obsession with M3.

In a slight measure, it is an expansionary Budget. The Treasury and Civil Service Select Committee makes that clear. It is nothing like what is needed in view of the scale of the self-generated problems. It is interesting that the Chancellor will not say that it is expansionary. While he is retreating backwards from monetarism, he still has to justify what he is doing in the theology of the original follies. He is in a curiously ambivalent intellectual position.

Another sign of relaxation is in the public sector borrowing requirement. To concentrate on that measure is in itself a folly——

Mr. Tim Smith

The hon. Gentleman quotes the Select Committee as saying that it is an expansionary Budget. However, the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) told us that it is a restrictive Budget. Why is it an expansionary Budget? The report makes that statement without any supporting evidence.

Mr. Mitchell

As the Chancellor cannot explain why it is an expansionary Budget, it is a little much to expect me to do so. There is no contrast with the comments of my hon. Friend the Member for Hackney, South and Shoreditch. He said that the Government's stance is contractionary if we allow for the cost of unemployment.

I am grateful to the hon. Gentleman for allowing me to make this point. If we allow for the cost of unemployment — on the House of Lords estimate, it is £5,000 per person out of work in lost tax revenues, benefits paid out and lost productivity—and multiply that by the number of unemployed — even though the figures have been sanitised, cleaned up and disguised in all possible fashions —that must come to more than £4 million. Contrary to Keynesian expectations, the Government are taking a contractionary stance towards the economy and damping down any pressures to generate recovery in the economy. To say that the Budget is expansionary is to take a conservative view of expansion. Bearing in mind the scale of the problem and the depth of the depression, this is a minimus Budget in all respects.

The Government appear to be obsessed with the public sector borrowing requirement, which seems to be their sole measure. There is no rhyme, reason or rationale for taking that approach. What other Government measure the success of their policies by the size of the PSBR? The Goernment are preoccupied with a mythical measure that tells us nothing instead of directing themselves to the real world of jobs, production, employment, manufacturing and bankruptcies. It happens that the Prime Minister does not like borrowing, but even the shop at Grantham must have been based at some stage of its existencee on borrowing. Probably that was not so in the latter stage when it was going down the drain fairly quickly. If it was at all prosperous at any stage, there must have been some borrowing behind that success.

Even the obsession with the public sector borrowing requirement is being modified by the privatisation procedures, which are being used to allow the Chancellor of the Exchequer to escape from the strictness of the PSBR approach. He is flogging off more and more national assets in the bankrupt programme which he calls economic management. The flog-off produces enormous returns for the Government's friends. These returns are achieved at the nation's expense for the assets belong to the people. The gradual resiling from the strict rigours of monetarism and the walking backwards from the doctrine wihout acknowledging what is happening have been noted by the Select Committee on the Treasury and Civil Service, whose report was made available this morning and which I commend to the House. It concentrates on praising with faint damns. That is the only possible approach for anyone with any intellectual integrity to take to the Budget.

There are faint damns because we, the members of the Committee, doubted whether the claimed stimulus to investment would materialise. We doubted especially the prospect of bringing investment forward and the long-term effect of the Government's cuts: in tax incentives for investment. There will be no transference from machine to labour, for example, because investment will fall in a nation which has never invested on an adequate scale and never made the best of its prospects. We doubted, too, the prospects for public sector investment, which has been emphasised strongly by the Select Committee on the Treasury and Civil Service over the years. The Government seem to have ignored the gradual rundown of crucial public sector investment to provide the infrastructure that will improve the quality of everyone's life and the base on which industry can operate effectively. That investment, too, is being eroded by the Government. The report concentrates on the need for investment.

The Committee doubted the prospects for growth. There is no evidence that even the Government's assumptions on growth are possible of fulfilment. The recovery, such as it is, is taking place in the high streets and not in the factories. It is a recovery that is stimulated by an expansion of credit and by people digging into their savings at a record rate. It has not washed over into production within British industry, into work on the shop floor. The recovery in that sector is modest and there is every possibility that the recovery of which the Government talk will peter out as it is not firmly based on production.

The Committee doubted the strength of the recovery compared with past recoveries in the faltering British economy. As my hon. Friend the Member for Hackney, South and Shoreditch said, each recovery has been less strong than its predecessor and each depression has been deeper than its predecessor. Certainly this recovery is far worse than the recovery which took place out of the depression in the 1930s.

William Keegan's book "The Thatcher Experiment" demonstrates clearly the long legacy of mistakes generated by the Conservatives' simplistic approach to economic management, the simple prejudice which has influenced and dominated their economic policies since 1979, the belief that they alone have the source of all knowledge and wisdom, that they alone know what to do with the economy. They have pursued those policies with disastrous results, leading to a record level of bankruptcies, the closure of capacity which Britain will need if we are to survive in an increasingly competitive world, the export of capital which has helped to fuel growth and investment in our competitors, and the destruction of skills and a rise in unemployment.

As we debate this Finance Bill we must ask what has been achieved by those polices. We were told that we must go through the sacrifices, perhaps even the torment, to enable us to lead the world in recovery and in coming out of a slump into which we had been led in the first place by the follies of the Conservatives. What has been achieved is a faltering, half-hearted recovery, as shown by the OECD main economic indicators. The figures, published in March last, were for the previous January —12 months seasonally adjusted, January to January—showing our recovery. We are supposed to be leading the world in that recovery, yet our competitor economies seem to be doing better than we are.

In GDP terms, our growth in that year was 3.2 per cent., the same as Japan and West Germany. But more than 1 per cent. of that 3.2 per cent. in our case was the oil economy, which is a transient factor in the long-term strength of the British economy, so that our real rate of growth was less than that of Japan and Germany, and less than the United States, at 5.2 per cent.

In terms of production—as opposed to a high street recovery based on the importation of Japanese video recorders and other consumer products which destroy jobs and which are purchased by people digging into their savings—the increase in production in Britain. at 4.5 per cent., was less than the United States, at 15–1 per cent., Japan, 9.6 per cent., and West Germany, 8.2 per cent. In other words, it was about half of that of our industrial competitors.

In manufacturing output the figures are even worse, an increase of 2.2 per cent. as against America, 16.3 per cent., Japan, 7.7 per cent. and West Germany, 7.9 per cent. If that is leading the world out of depression, there is precious little in the Government's performance on which they can congratulate themselves.

The Government say that they are bringing down inflation. What has been the effect of that on the economy? Unit labour costs in Britain, which should be the height of the Government's achievement if their policies were justified, increased by 2.5 per cent. in that year, as against a fall in the United States of 4 per cent., of 0.7 per cent. in Japan and of 3.6 per cent. in West Germany.

The reason why our unit labour costs are increasing is simple. If the economy grows, production expands and unit labour costs come down as the unit costs of production come down because of that expansion. Improvement in that respect is a feature of growth, not of the misery and decline through which the Conservatives have put our economy in the last few years. In other words, there is no basis for long-term sustained recovery.

In the long term we are sliping back into the norms of inadequate British performance. After all we have been through, we have reverted to something worse. Earnings are still increasing at a faster rate than production, despite the Government's self-proclaimed achievements. All the sacrifices and the terror of unemployment have been experienced for nothing. As always, investment is low. We are still losing world trade, despite our already minute portion. Under this Government, exports continue to do badly, and imports have surged taking an increasing share of the British market.

Average productivity has worsened. The much-vaunted achievement in productivity is simply a feature of less productive capacity because of old capital stock and low investment. We have seen an artificial improvement in productivity which takes no account of the burden on the unemployed and the productive sector of the economy. We are placing the increasing burden of unemployment on a shrinking productive sector.

The Institute of Fiscal Studies has pointed out that the effect on the economy of the increase in productivity is similiar to a cricket team attempting to increase its batting average by shooting the last four batsmen. That action would certainly increase the batting average. The improvement in productivity is simply a feature of more rapid closures and bankruptcies under this Government. The underlying improvement is minimal.

The exciting new initiatives and measures taken by the Government and embodied in the Finance Bill have resulted in Britain being in the same old dreary rut, with the additional burden of the vainglorious self-congratulations of the Chancellor and the Prime Minister.

In the past, people asked, "Why are we not doing so well?" Now they tell us how well we are doing and ignore the figures. They are escaping from reality. We are back in the rut of comparative decline after four years of Thatcher economic experiment. Britain has declined while other countries have surged ahead.

We have declined slowly from a major position with a large share of world trade. We have experienced full employment and the benefit of post-war growth in investment, especially under the Labour Government between 1945 and 1951. Now after the trauma of the Thatcher experiment, we are still in a period of comparative decline. We have 4 million unemployed and an economy suffering from inadequate investment, a reduced productive capacity and a reduced share of world trade. This country must carry those burdens as we continue the slow, miserable whimpering slide that the Conservative party promised to turn around when it came into office. The Government promised to provide answers.

The Chancellor has shown a shift away from the theory of monetarism. That is no surprise, given the disastrous scale of the failure. Even a Chancellor as vainglorious as the present one can recognise some elements of reality.

It is worth while pointing out the achievements, which my hon. Friend the Member for Hackney, South and Shoreditch did so eloquently, and the groups in whose interests they were made. Lester Thorough's new book "Dangerous Currents—The State of Economics" makes an interesting reflection. He says that every economic policy serves an interest and is presented as a major contribution to theory. In practice and performance, it serves one interest or another. He says: The basic problems spring from the fact that there are no public policies so good that everyone's income goes up or so bad that everyone's income goes down. In short, every policy has income distribution effects. In economic theory it is possible to avoid the problem using the concept of Pareto-optimality in which concept state A is better than state B if the winners in state A could compensate the losers in state B. The winners in state A never compensate the losers in state B. This policy has shifted resources from the productive sector of the economy, the working class and the less-well-off to the better-off sections of society represented by Conservative Members. The gainers have been those with capital, those living on interest and those who have seen the pound increase in value.

When the Prime Minister talks of sound money she is forgetting that a high exchange rate and high interest rates, which go with the policy of sound money, transfer power and wealth from the poor to the rich; from our section of society to that represented by Conservative Members. The disasterous slide into the semi-retired economy, the Denis Thatcher economy—a land fit to retire to on the south coast, on capital with cheap servants while the mass of the nation is reduced to poverty—is transferring money to their section of society, a policy which the Finance Bill accelerates. The policy is designed to further the interests of one sector of society.

In a misguided moment of hilarity and humour which occurs rarely enough in Finance Bill Committees, in Committee on a previous Finance Bill I compared the Prime Minister to Captain Queeg standing on the bridge, the light of madness in his or her eyes, depending upon how one interprets Queeg, clicking balls — a painful operation for those who have been clicked in that way although "clicked" perhaps suggests something harder than that which took place for those who were privatised or deprivatised during the Prime Minister's triumphant period in office—and heading the ship into the storm.

The only difference with the new Chancellor is that the capacity of the ancient manufacturing industries —the internationally-traded sector by which we live and which we must have if we are to survive as a competing economy — has been irreparably damaged by the four years of Thatcherite folly. Now, as the captain resiles from monetarism, we are abandoning faith in the compass. At least in the past the Chancellor told us that he knew what he was doing—follow the M3 compass and all would be well with the economy. He has now given up faith in the only steering instrument he took on the trip.

It emerges clearly from the proceedings in the Treasury and Civil Service Select Committee that we have a Government who are embarking, not on the basis of plans, insight into where they are going, or knowledge of what is happening to the economy, but on the basis of faith, prejudice and prayer. I should like to quote from the Committee's report on that matter. When I asked the governor of the Bank of England, who should know about these things, about where the economy was going, what would bring down unemployment, even if we achieved all the goals of low inflation — a reduced PSBR, money supply within the bounds set for it by the bank and the Chancellor—in a world where competitor Governments and industries are investing and being fuelled by a flow of investment from this country, he said: I can only answer that question by saying by what I call the entrepreneurial ambition of the people in this country in the environment which encourages them to increase their business. The entrepreneurial flair which has sustained us so well since the war will take us out of the recession once we have achieved all the mythical objectives that the Government have set. The Chancellor replied in similar bald terms to questions about what will happen to the economy. When I asked the Chancellor: Has the Treasury carried out any analysis of what is going to make good the difference when the oil revenue begins to fall off? What is going to contribute to our balance of payments and what needs to happen for that to occur so we do not run into balance of payments constraints of the old type … he said: What needs to happen is that market forces need to be allowed to work free from Socialist constraints of the old type. That was the answer — no compass, no plan, no organisation, no thought—just prejudice; just let us get rid of the constraints. I then asked him: Has the Treasury analysed it, apart from that rhetoric? The Chancellor replied: I have no idea. I hope most of my officials at the Treasury have better things to do than to look in crystal balls and try and recreate the national plan.

Mr. Mark Fisher (Stoke-on-Trent, Central)

My hon. Friend is talking about crystal balls and about the evidence that was given to the Select Committee. Is he as surprised and apprehensive as I was at the reply of a Treasury official to the question: What are your estimates of unemployment for these years? talking about the medium term? The Treasury official said: We do not have precise estimates of unemployment over the whole period. Is it not a matter of concern to my hon. Friend that the Government are trying to plan an economic strategy and yet are making no estimates of the effect of that strategy?

Mr. Mitchell

I am grateful to my hon. Friend. The most horrifying thing about the interviews that we conducted with the officials of the Chancellor and the governor of the Bank of England was the simple emphasis on blind faith as an instrument of policy in a world where other people are trying to plan for growth and deciding to channel investment in such a way that some industries can develop and others can be held back so as not to absorb capital and labour. In a world in which states are participating and planning, or at the very least acting as ringmaster in the whole process, all we have in this country is faith in the market and in blind, simple prejudice. There is no concept of what will happen if that blind faith is not justified. There is no conditional planning, no alternatives envisaged and no idea how we will escape from the problems that even I, with my limited economic knowledge, can foresee.

When I asked the Chancellor: Surely it is important to analyse the problems and see what is going to happen and take steps to prevent any disasters happening.… he said: That is not analysis, that is prediction and long term prediction is usually a futile occupation. What is more important is to analyse what are the conditions that facilitate a successful economy and those conditions are the absence of constraints, freedom as far as possible for market forces, the elimination of inflation, and those are the conditions which we are securing by our policies. In other words, we are securing a return to the basic economic conditions of the 18th century. What the Chancellor neglects is that that was the kind of climate which produced industrialisation only in this country. Other countries planned and invested for it and protected it. They are still doing that.

With our blind, naive faith we are laying ourselves open to an ultimate disaster once the cushioning factor that sustained the Government so well — oil — begins to dwindle. I have seen estimates that 40 per cent. of the known reserves are correct, but it would be interesting to know whether the Government have calculated that they can carry on in this foolish, headstrong, wasteful fashion for four years until the next election and leave the incoming Labour Government to clear up the mess and the disaster which will almost certainly result as oil's contribution to tax revenues and to balance of payments begins to dwindle.

We have seen an economic policy, of simple, blind faith. This is not going back to the Crippsean course, as was once said of a Labour Government in the 1960s. There is no need for that. This is going back to the Selwyn Lloyd doldrums of the early 1960s and all those brave hopes——

Mr. Tom Clarke (Monklands, West)

As I listened to the interesting speech that my hon. Friend was making, I tried to reflect on the view that my constituents would take of the objectives of the Finance Bill and of the interview of the Select Committee with the Chancellor.

In my constituency, unemployment is about 25 per cent., so the House will not be surprised to hear that the major objective of my constituents is a reduction in that ridiculously high level of unemployment. In the interview with the Select Committee to which my hon. Friend has referred, did the Chancellor set any date for the reduction of unemployment? Did he set it as a major objective? Did he offer any hope to the unemployed among my constituents, especially the young people that I represent?

Mr. Mitchell

I am most grateful to my hon. Friend for that very important intervention, because he has mentioned a subject with which I am also preoccupied. Under this Government, male unemployment in Grimsby is now one in five—a statement of shame that seems to have been ignored by Conservative Members. That rate applies in a port which since the war has always done well economically.

Neither the Chancellor nor the officials — and certainly not the Governor of the Bank of England— mentioned any possibility of a fall in unemployment. Indeed, they posed a simple problem. Their estimates of growth after this year were slightly over 2 per cent. We have had all the growth that we are getting, and that will bring down the average after this year. Their estimate of the likely improvement in productivity was 1.5 per cent. Their estimate of the increase in the labour force was 0.5 per cent. In other words, if there is any increase in productivity over 1.5 per cent., unemployment will automatically rise on that kind of growth prediction. Unless they can get growth up beyond that level—there is no indication that they can, because they have no concept of how to do it, apart from faith and prayer, and prayer seems to be in short supply these days in Downing street, although glycerine is still in fashion — the unemployment rate must rise. That is why the Government have suddenly abandoned their optimistic statements that unemployment is on the turn and is about to fall. There is now no possibility of unemployment coming down. That is why the Finance Bill is a confidence trick on people. The Chancellor makes brave noises about encouraging industry and helping to stimulate jobs, but there is nothing in the Bill which could achieve either of those objectives. Certainly there is nothing to expand an economy whose main disastrous problem is a deficiency of demand for the products made in Britain.

Mr. Jim Craigen (Glasgow, Maryhill)

I do not know why my hon. Friend is surprised that there is nothing in the Finance Bill that will reduce unemployment. The Chancellor said very little on the subject when introducing his Budget.

My hon. Friend will be aware that the Manpower Services Commission, in its recent corporate plan, has shown that to size of the labour force will, if anything, increase, and apparently foresees very little prospect of any sizeable reduction in unemployment. Moreover, my hon. Friend will be aware that some of the increases in employment which have taken place have tended to be in part-time jobs.

Finally, will my hon. Friend comment on the recent pronouncements by the chief executive of the National Economic Development Council, which offer very little hope to the Chancellor of the Exchequer, despite the fact that last year, in his desperation to find jobs somewhere, he asked the council to look into future employment trends in the United Kingdom?

Mr. Mitchell

I am most grateful to my hon. Friend for his very telling points, because those are bodies — particularly the MSC and the NEDC—which are more concerned with the real world. The Chancellor is concerned with financial markets and the interests of finance, and of those who make and manipulate that money, rather than those who actually make things and give employment. The MSC report is one of the most gloomy, but objective, forecasts that we have seen. The Government are taking refuge by avoiding the problem altogether, but at least they have stopped telling us that the reduction in unemployment is just round the corner, as they have been telling us for the past four years. On a learning curve, that is some progress.

As my hon. Friend the Member for Livingston (Mr. Cook) said in a debate on the Finance Bill last year, to this Government unemployment is not the problem but the answer. That is the difference between the Conservative party and the Labour party. To the Labour party, unemployment is a problem which we have a national duty to solve, because we must give people an investment in lives, jobs and in a future for them and their country. The Conservative party regards unemployment as a means of managing the economy to damp down the forces not only of demand but of wage pressure, to break the negotiating power of the trade unions, to cow the working classes, and to make people so frightened for their jobs that they will not ask for substantial wage increases. That has been their weapon, and what they have called the new realism is the new fear.

The Government should be ashamed of the fact that, after five years of high unemployment, they cannot produce a finance Bill to solve the problems that face many of our people.

Mr. Craigen

Unemployment trends are different across the country and affect some areas more than they do others. If unemployment had a greater impact in the south-east of England, the Government's policies might change. However, at present it affects our traditional manufacturing areas.

Mr. Mitchell

That is part of the problem. Not only is there a north-south differentiation—my hon. Friend is right to say that the Government would have acted had unemployment hit their supporters in the same way as it has hit ours—but there are differences between groups. The Conservative party has a preponderance of red-faced farmers who have done well out of the Common Market, professionals, and people who have no connection with the real world of making and doing things, who come here and expound the economics of Sandhurst, the Inns of Court and the law schools—anything but the economics of jobs, people and production, which are what we need.

Mr. Alan Howarth

Perhaps instead of stoking fears about future unemployment the hon. Gentleman might find the humility and social concern to remember that under every Labour Government since the war, unemployment was higher when they left office than when they took office and, therefore, to reflect that Socialist policies have done great damage to employment and would do so again.

Mr. Mitchell

The hon. Gentleman is repeating the canard developed for the previous general election, which was disproved at the time. It is not true that unemployment has increased under every Labour Government since the war. I agree that, to our shame, unemployment increased to 1.5 million during the previous Labour Government. However, it had decreased to 1.3 million when we left office. It is important to remember that that increase occurred when Britain was facing the worst economic crisis since the war, and when the Government did not have the supreme benefit of oil. Oil gives this Government the ability to expand the economy, to avoid the balance of payments constraints which have affected Britain since the war, and to grow, invest and organise for the future. But what have they done with that oil? They have used it to finance the flow of manufactured imports that has destroyed British jobs, and have used the tax revenue to support the unemployment generated by the balance of payments. They have wasted that supreme national asset which God put in the North sea to prove that he was not a Muslim. Although they inherited a decreasing rate of unemployment, they accelerated it rapidly.

The brave hopes of regeneration have turned into the tax fiddles of this Finance Bill. The problem is that in the meantime——

Mr. Jeremy Corbyn (Islington, North)

In his most interesting contribution, will my hon. Friend consider the number of bankruptcies under the Conservative Government in relation to their idiotic remarks about unemployment under Labour?

Mr. Mitchell

The Government have merely produced a series of palliatives designed to give the impression that something is being done for small businesses when large business and huge employers of labour are going bust, closing down capacity and laying people off at record rates, in addition to all the small firms that are going bust. For the Government to claim as an achievement the help that they give to small businesses that they drove to bankruptcy in the first place is one of their supreme hypocrisies. Another is a business community more supine and quiescent to their policies than ever before because business men are more interested in the tax advantages to themselves as individuals than in the effects of the Government's economic policies on their production or their employees. The business community has taken everything that has been handed out to it and has rejoiced in the machinery for its own destruction, having learnt to love and to grovel before the rod for its own back.

In the United States, by contrast, although Reagan came to office committed to Thatcherite economics the whole thing was reversed in little more than a year. Moving into Keynsian— to use a dirty word— deficit financing on a scale that would terrify the British Government, Reagan abandoned the money supply targets and was printing money like it was going out of fashion. The result has been the creation in just over a year of 4 million jobs in the United States. That happened because the American business community howled in protest at the consequences of the earlier policies while our business community sat down and took them.

Mr. Hoyle

Why is it that Sir Terence Beckett, director general of the CBI, who talked of bare-knuckle fighting with the Government when unemployment was far lower, no longer voices such opinions and indeed has been praising the Government although everything is getting worse?

Mr. Mitchell

It is because British business men are more concerned with their self-interest as business men than with the interests of business. That is why the bare-knuckle fighting turned into bare-bottom kissing within a matter of hours. It could not have happened in any other community in this country.

I represent a Humberside constituency in which one of the few surviving industries is casing air in tin and calling it a caravan and I go every year to the caravan fair at Olympia. In 1981, I sat next to a caravan manufacturer. When I asked how business was, he said that it was terrible as people were no longer borrowing money to buy caravans because of the high interest rates. When I said that the exchange rate could not be helping much, he said that it was a disaster and that the industry's dominant share in the Dutch market had been lost to the French and the Germans because the British industry could not compete due to the value of the pound. Thinking by this time to stir some animosity against the Government, I asked him how business was generally. He said that it was awful and that it was down to a two-and-a-half-day week. Moving in for the kill, I said, "You cannot think much of Mrs. Thatcher's economic policies." "They are wonderful, marvellous," he said, "At last Government have the power to manage!" That is what he was interested in— not the ability to make, but the power to manage. Interestingly enough, that manufacturer—Caravans International of Newmarket—went into receivership last year.

Mr. Jerry Hayes (Harlow)

I hesitate to interrupt the hon. Gentleman, who has the unique capacity to hold himself utterly spellbound. I am one of the few supporters of his proposal to televise the House. I believe that it would be a tremendous asset, as at least we should have the opportunity to switch him off.

I want to ask the hon. Gentleman about business confidence and what is happening to Britain and British industry. If he visits my constituency of Harlow he will see that major industries such as Cossons and STC are optimistic and are taking on more and more people.

Mr. Mitchell

It is clear that business, seeing the future under the Government's economic policies, are investing overseas at a more rapid rate than has ever occurred in British history. That is the extent of their faith in Britain's economic policies. Indeed, an extra £15 billion has gone overseas and investment in Britain has dropped by £27 billion since 1979.

If the hon. Gentleman is telling us that all depends on the new industries, I can only say that the new industries will come on the back of the old industries. New industry, investment, techniques and technology come to a economy which is prosperous, growing and with a tradition of investment. They do not come to a dump with an excessive rate of unemployment pressing on the rest of us, which has been relegated by the policies of its Government to the periphery. The Government have produced an economic Northern Ireland, vis-à-vis the Common Market. We shall get a flickering of new investment, nothing more. There will be no sustained pattern of new investment, because there is nothing to bring that investment here in the present climate and there is everything to cause firms to send their capital overseas. Is the hon. Gentleman's point simply that people will not be watching television at this time of night but watching forms of pornography other than the hon. Gentleman and his party?

Mr. Stuart Randall (Kingston upon Hull, West)

Perhaps the hon. Member for Harlow (Mr. Hayes) does not have as many problems as places such as Hull and other parts of the north-west and the north-east. The Government, in their White Paper last December, stated categorically that the Government will cut back their investment. If the Government want to rely upon private investment to encourage investment in the regions—that is their policy—if they are going to cut back on public investment, places such as Hull, the north-east, the northwest and Scotland——

Mr. Deputy Speaker (Mr. Harold Walker)

Order. I am not sure whether the hon. Gentleman is intervening or seeking to make a speech, but we had better get back to the speech of the hon. Member for Great Grimsby (Mr. Mitchell).

Mr. Mitchell

I am grateful to you, Mr. Deputy Speaker. None the less, my hon. Friend's point is valid. It is insulting for the hon. Member for Harlow (Mr. Hayes) to tell us that his constituency is doing well when I have described what is happening to the rest of the country,. particularly to those areas which do not have and have not had the sustained high standard of living of the past 25 years of the south-east and have not the fat and the reserves to ride out the recession in the way that the south-east has. It is a peculiar kind of complacency to reflect on Britain's problems with the attitude of "I'm all right Jack" — which essentially is what the hon. Gentleman is doing.

Mr. Hoyle

Will the hon. Member for Harlow (Mr. Hayes) tell us the unemployment rate in Harlow in 1979 and now?

Mr. Mitchell

I see that there is no reply to that question. The hon. Gentleman does not have the statistics. There has been an increase, even in the south-east.

Mr. John Golding (Newcastle-under-Lyme)

Does my hon. Friend think that we should table questions on the size and percentage of youth unemployment, adult unemployment and long-term unemployment in Harlow to see precisely how well his constituents have done under the Government?

Mr. Mitchell

I hope that my hon. Friend's intervention eliminates the insulting point made by the hon. Member for Harlow (Mr. Hayes) to hon. Members, such as myself, whose constituencies have a male unemployment rate of one in five. Many of my hon. Friends have even higher rates in their constituencies. That is a national tragedy and not something about which to rejoice or to make party political points.

Under the economics of monetarism, from which we are slowly and painfully resiling, enormous damage has been done to the real economy in the pursuit of unattainable objectives. The Government could not control the money supply; all that they could do was to ration money, which they did by putting up interest rates, with the result that, because we are an oil power, the pound went up as money flowed into this country which was regarded as a safe funk hole for the funny money that was flowing round the world.

Mr. Stuart Bell (Middlesbrough)

Does my hon. Friend agree that the Government's greatest mistakes were to push interest rates up to 21 per cent. and the value of the pound to $2.40? Was not that the direct cause of the creation of 2 million unemployed?

Mr. Mitchell

I agree absolutely. The Select Committee on the Treasury and Civil Service, in a report that appeared just before the general election—it was disowned by the Chairman of the Committee, but owned up to by the rest of the members, because it was the view of the Committee — said that more than half of the unemployment that had developed since 1979 was a direct consequence of Government policies on interest rates and the exchange rate. The Government plunged unthinkingly into that folly without an idea of what they were doing. That accelerated the rate of inflation and the Government subsequently took credit for bringing it down — even though they had pushed it up in the first place.

Mr. Golding

Is not my hon. Friend in danger of overlooking the increase in VAT to 15 per cent., which was so disastrous to employment, and the extension of the tax, which will be disastrous, to the catering industry?

Mr. Mitchell

I agree with my hon. Friend. That increase accelerated inflation to over 20 per cent.

The Chancellor told the Select Committee that the manufacturing sector must inevitably decline because we are an oil power. That is economic nonsense of the first order. There is no inevitable reason why manufacturing should decline just because we have oil. We could have expanded the economy and created a balance of payments problem to avoid the pressure of oil pushing up the exchange rate.

Mr. Hoyle

Does my hon. Friend agree that every other oil-producing country is investing its revenues in its industry, particularly manufacturing industry? We are the exception.

Mr. Mitchell

I agree. We are sending our money overseas at record rates to fuel the growth of our competitors. The Prime Minister tells us that we are providing for our future. She is really saying that we are providing for the future of some — those who get the returns on those investments—but we are not providing for the mass of the people.

It is as if ICI, which, thank heavens, is beginning to make profits again, decided to invest its profits in its direct competitors overseas. What folly that would be. Yet that is what we are doing as a nation—we are investing in the growth, jobs and future of the countries with which we compete directly. And we call that folly providing for our future. I have never heard such economic rubbish.

Mr. Bell

The Prime Minister boasted on television last night that £35 billion had left this country since 1979, but no one has told us the annual rate of return on that so-called foreign investment.

Mr. Mitchell

The direct question that must be asked is why that £35 billion has not been invested in this country, to provide jobs for our people and a future for our country. What is so wrong with Britain that its capitalists must rush to take their money overseas when they have a Government that shower tax concession after tax concession on them? Do they have no faith in the future that the Prime Minister promised them?

Mr. Robert Parry (Liverpool, Riverside)

Is my hon. Friend aware that British American Tobacco, which recently took over the Eagle Star Insurance Group for £936 million, promptly announced 1,100 job losses in Liverpool and 700 job losses in Southampton and yet it recently declared massive profits of £971 million? The people up there to whom I am pointing in the Strangers' Gallery——

Mr. Deputy Speaker

Order. The hon. Gentleman cannot do that.

Mr. Parry

The jobs of the people up in the Strangers' Gallery, who are listening to this debate, are at stake in areas such as Manchester, Liverpool, Newcastle and Glasgow.

Mr. Mitchell

My hon. Friend the Member for Liverpool, Riverside (Mr. Parry) is rightly moved by the plight of his friends and constituents who are being thrown out of work by a callous multinational to which operations in Britain are peripheral. That is what is happening to the whole economy. The Treasury and Civil Service Select Committee heard Ford (UK) and Ford (Europe) say that if the pound remained over-valued—they estimated that it was over-valued by about 20 per cent.—they would not make new investment in Britain but would source cars from outside. That is exactly what is happening.

Perhaps the Prime Minister going around the world grovelling for investment in Britain, even if the investment is to come from fly-by-night operations that want a tax funk hole is the last vestige of British pride. If that is the essence of the Prime Minister's economic policy, she is preparing a future in which the jobs that such investment generates will be subject to the type of whim that my hon. Friend has just outlined. British people's destinies will not be controlled in Britain because the Government are abdicating their responsibility to develop, organise and expand the economy for the benefit of British people. The only real future lies in having a competitive exchange rate and low interest rates to stimulate investment by our firms, and our business men in this country so that we can manage our destiny for our benefit rather than for the profit of some multinational that will shed its interests at the first opportunity.

Mr. Hoyle

My hon. Friend is making a strong point about the decline of manufacturing industry. The Government are talking about service industries. How will service industries, such as fish and chip shops be helped by the introduction of VAT on take-away foods?

Mr. Mitchell

I shall deal with take-away foods slightly later in my speech. It is take-away rhetoric at the moment, but I shall deal with take-away food. The Chancellor seems to think that service industries can grow in a vacuum, but they cannot. There must be healthy manufacturing industry if they are to grow, but he has destroyed that healthy base. When the Chancellor says that the Bill will stimulate recovery, he is saying that, thanks to the destruction of jobs, capacity, employment, firms and the future we are now like a one-legged man who is taking his first few halting steps on the road to recovery. We are not leaner and fitter but leaner and weaker and we have had a leg amputated by what has happened in the past five years. Now that we are in that situation, the Chancellor prides himself on the glimmerings of a recovery. It is nothing like the recovery that has taken place from previous setbacks, and certainly nothing like the recovery that took place from 1931 to 1936.

Mr. Bell

Is it not a fact that the recovery to which my hon. Friend refers is essentially a United States recovery, based upon the fact that it has a deficit of $20,000 million, and are we not simply following on from that recovery in the United States?

Mr. Mitchell

I think that that is the essence of the point. The Chancellor is telling us essentially that we are recovering because the United States, which is recovering by doing the exact opposite of what he told us was sound economic policy, is recovering at such a fast rate. In other words, crime pays in the United States, on the Chancellor's definition, and, like puritan pimps, we shall benefit from it, because that is what is happening. If the United States is engaging in deficit financing, because of its abandonment of money supply targets, its recovery will be at a fast rate. It has created 4 million jobs in the last year.

Mr. Golding

Why is my hon. Friend telling us the views of the Chancellor? Has not the Prime Minister said that he is too optimistic? Has not the Prime Minister said that the Chancellor does not know what he is talking about when it comes to unemployment? Would my hon. Friend relate his remarks to the size of unemployment and to the amount that we are spending on unemployment, £17 billion, at the same time that we are exporting capital? Would my hon. Friend deal with the organ grinder, and with the remarks of the Prime Minister, not her underling?

Mr. Mitchell

I am grateful to my hon. Friend. I shall certainly come to that point later. It is well worth developing.

Our recovery is very feeble and glimmering compared with the recovery in the 1930s, when another Conservative Government were in power. I do not think there ever was a recovery without an expansion of the credit base in the economy commensurate with the margin of idle resources in that economy. That margin of idle resources is enormous. There was a huge increase in domestic credit just before the last election by this so-virtuous Government, but it washed abroad in the form of increased imports. Thus we have been financing, thanks to that expansion of domestic credit, an increase in employment in competitor countries, mostly in the EEC, to whom we have already lost over 1 million jobs from this economy in the last ten years. We have had an expansion of credit without any payback in terms of employment and output. We now need a huge expansion of credit.

What happened from 1931 to 1937 is an important object lesson to us. That depression is commonly thought to have been worse than the present depression. It was not worse. This depression is much deeper, and has lasted far longer. The number of jobs lost in the Thatcherite depression is three times the earlier figure. The number of long-term unemployed in the Thatcherite depression is three times the level of long-term unemployment in the so-called great depression in this country. The labour force is now about one third higher, but the real problem before the war, as now, was that our export market collapsed, and there was a rapid increase in the labour force. Our export performance in the recovery was far better than our present export performance. Manufacturing output rose 58 per cent. between 1931 and 1937. It rose to 38 per cent. above the 1929 peak. In the decade since 1973, we have seen a decline in manufacturing, amounting to a fall of 16 per cent.

We have to go back to 1923 to find a year when industrial production was less than it is now, at the summit of achievement of monetarism and Thatcherism in the economy. The engine of recovery in 1931–32 was the devaluation of 35 per cent. against the dollar and the gold bloc countries, plus a minimum tariff of 10 per cent. on imports and a policy of ultra-cheap money. From time to time enormous pressure was put on the Government to return to the gold standard, but it was always avoided. because the Government were then concerned about the effect on exports of devaluing sterling.

Mr. Craigen

My hon. Friend has mentioned the continuing decline in manufacturing capacity. As Ministers constantly talk about the importance of developing science-based industries, is it not essential to retain a strong manufacturing capacity, if only to sustain the future growth of such industries?

Mr. Mitchell

That is an extremely important point. The Chancellor seems totally contemptuous of manufacturing industry. Whenever he is asked about it, he says that it represents only 25 per cent. of the economy. However, it is the basic part of the economy, and everything else rests on it. As manufacturing industry runs down, and as we turn over more and more of our car market to the EEC, more and more of our domestic appliance market to the Italians and more and more of our hi-fi market to the Japanese, we need less steel, so the steel industry winds down, we need less coal, and the whole economy becomes locked into a spiral of decline.

Recovery will not come from a few computer-based interests, even if Sir Clive Sinclair is cloned. Indeed, even if he is trebled, there will not be any recovery, because there is no manufacturing base on which to rest that sector.

Mr. Stuart Holland

Having mentioned Sir Clive Sinclair, I am sure that my hon. Friend would like to remind the House that, although Sir Clive has been knighted and lauded by Conservative Members and hailed as evidence of a new flourishing entrepreneurship, he would not be in business now if it were not for the National Enterprise Board.

Mr. Mitchell

I agree, Sir Clive has been knighted by the Government who benighted the enterprise board. The Government go in for a strange form of justice.

It is important to find out how we recovered from a depression in the 1930s that was not as bad as this one. The essence of that recovery was devaluation plus cheap money. The bank rate was forced down from 6 per cent. in February 1932 to 2 per cent. in June. It was cheap money, and the pumping out of money to lower interest rates, that brought about the recovery of the 1930s.

In January 1934, the London and Cambridge Economic Service said that the money figures showed that the cheap money policy of expanding the cash base of the banking system"— that is what the Government were doing— is still being vigorously pursued. Whether the object is to facilitate Government or industrial borrowing or to assist in depressing the value of sterling it is impossible to say. But it did not matter, because both those things were virtuous purposes: expanding Government borrowing to stimulate the economy and bringing down the exchange rate at the same time.

That was the fuel of expansion in the 1930s, and those are the weapons that the Government are eschewing as if they were the harbingers of disaster. The economy will not recover, however, until the Government turn to those same weapons of devaluation, cheap money and an expansion of the monetary base to cope with the rise in unemployment. We should bring about recovery by the same techniques as were used in the 1930s. It was a Conservative Government that did that then, but they had some concept of the impact of unemployment and the misery that it generated in the nation.

This Government have no such concept. Ministers sit in their remote little south of England fastnesses, content and complacent. while the country suffers and slowly declines, and they call that improvement. The Prime Minister tells us that she is making the country strong, yet she is destroying the industrial base—the very thing that allowed us to fight the 1939 war, and to build the tanks, aeroplanes and armaments. What sort of conflict could we face—if we had to—on the present shrunken industrial base, with our shipbuilding capacity semi-destroyed, with the steel industry run down, and with a coal industry that is being closed down? How can the Prime Minister call that strength? The recovery of the 1930s was an example to the Government.

It is important to remember that the stance is still contractionary, if one allows for unemployment. There is no Keynesian reflation, because once one allows for the cost of unemployment and deficit financing or counter-cyclical spending is not involved in that, but essential social security spending — a social obligation. In that respect there is no expansionary stance and there can be no recovery.

The quarterly review by Butler Till, Ltd. written by David T. Llewellyn, once an adviser to the Treasury, says that the Government are borrowing far less than any of our competitor economies which are expanding more rapidly than we are. In 1983 in the United States, the federal deficit widened by 75 per cent., with no increase in interest rates, yet the Government say that they dare not increase the PSBR because that would put up interest rates. What nonsense.

Mr. Bell

Can my hon. Friend explain the Chancellor's figure of 2.5 per cent. in relation to the PSBR next year? Does my hon. Friend agree that the Chancellor has plucked the figure out of his head and has reduced the amount that he should be borrowing if he wants any expansion in our economy?

Mr. Mitchell

I am tempted by my hon. Friend. The Chancellor has trussed himself up like a turkey. Like one of those poor sex victims found tied up and naked who get sexual pleasure out of their own binding, he takes pleasure in being bound by in the medium-term financial strategy and by targets which are unattainable and which strangle the economy. All that the Chancellor can do is to manipulate within the tight targets which he has imposed in a monetarist witchcraft. What we need to get out of this disaster is a massive expansion of the money supply and a consequent devaluation of the pound sterling to make our industries competitive in the world market.

I turn my attention now to the basic measures in the Finance Bill — this important measure. It is right to allow this full debate, because it is the longest Finance Bill in recent years. The Standing Orders presuppose, by exempting the Bill from the 10 o'clock rule, that a debate of more than six hours will be allowed.

Mr. Deputy Speaker

Order. The hon. Member should address himself to the debate and leave the chairing of the meeting to me.

Mr. Mitchell

I am grateful. I did not mean to dictate.

Mr. Deputy Speaker

There may be many seats in the Chamber, but there is only one Chair.

Mr. Mitchell

I am grateful to you, Mr. Deputy Speaker, for increasing the limits of my numeracy.

I shall deal first with one of the Bill's major inadequacies—the failure to do anything serious about one of the most pressing social problems, the poverty trap.

Mr. Golding

Will my hon. Friend do the decent thing and start at clause 1 and go through the Bill clause by clause, as I intend to do later?

Mr. Mitchell

I intend to make a short speech. I have no desire to impose upon the House. My hon. Friend may wish to encourage me, but I want to concentrate on some of the Bill's main provisions in so far as they affect my constituents. In Grimsby, as in the nation, poverty is a problem. The Government who have created 4 million unemployed and pushed 7 million people below the poverty line, should have had the decency to tackle the poverty trap.

In a brilliant speech, my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) dealt with the intolerable marginal rates. This is the first time that the child benefit increase has been missed out of the Budget. That is a contradiction of the policies that the Conservative party put forward during that deceitful 1979 election, when they deceived the people into voting for them. When in opposition, Conservative Front Bench spokesmen underlined their party's commitment to treat increases in child benefit in the same way as reductions in taxation. They said that the aim was to secure an improvement in the real value of child benefit as part of an overall reduction in the burden of direct taxation. They issued a press notice to that effect in July 1977.

Indeed, Conservative women recommended to the Chancellor that child benefit be increased in line with any increase in tax allowances — but they were not. The failure to do so means that the Government will not bring help to those most immediately in need—the poor with large families. It is a criminal abdication of responsibility. The likely increase of 35p is a weapon that should have been in the forefront of the armoury to deal with poverty.

A 12 per cent. increase in tax allowances requires a child benefit increase of 95p, rather than the 35p assumed in the Treasury tables. With any sense, it should have been possible to increase child benefit by 130 per cent. if the benefit was made taxable. Money would then be clawed back from those who need it least. The actual cost of a 130 per cent. increase would be only £2.5 billion on a taxed basis.

The Chancellor said that the tax thresholds were necessary to tackle poverty, but he also said that there was no quick or cheap solution to the problem. He then plumped for what is the most expensive solution—an increase in tax allowances. Raising tax thresholds is an expensive way of dealing with the problem of poverty, because it fails to target the help directly to families who are the chief victims of the poverty trap.

The report of the Treasury and Civil Service Sub-Committee said that it was disappointing that expensive reforms did not achieve more to reduce the problems. The difficulty of the increased tax threshold is that it is not closely enough focused on the groups that must be helped if we are to resolve the poverty and unemployment traps. Last year, of the 800,000 tax units freed from tax by the increase in personal allowances, only one in 10 had children. Help should be concentrated on those who need it most. Not to do so is a major abdication. Only one in 10 of those people were in the poverty trap.

The second abdication of the Finance Bill is on national insurance contributions. I praise the Government for their action on the national insurance surcharge—late though it is. It is national insurance contributions which have increased the tax burden on the mass of the people. The income tax burden had been reduced before the Budget by about £1.2 billion, but the burden of national insurance contributions has been increased by about £3.4 billion. That is why tax is pressing more heavily upon the people. National insurance contributions have to be viewed as a form of taxation and everyone who is earning less than £20,000 a year is feeling their effect. The national insurance rate has been increased from 5.5 per cent. under a Labour Government to its present rate of 9 per cent. It is a regressive tax on the mass of the people. It is the Government's version of redistribution—taking from the poor to give the rich.

There is a huge gap between the figure at which national insurance contributions begin to be paid, which is £1,768 a year, and the sum of £3,155, which is when tax begins to be paid by a married couple. Many working women in Grimsby feel that national insurance contributions are a form of direct taxation on them, as indeed they are. The gap between the two forms of taxation has increased and national insurance contributions are pressing more heavily on the incomes of the less well-off. It would be far better to have a social security tax, which could begin at the same threshold as that which is used for current taxation and need not have an upper limit. Employers would pay the tax in respect of all employees. That would be a far fairer way of raising the money for national insurance and social security funding than the present regressive taxation, which has been a major cause of the shift in the burden of taxation towards the less well off sections of society.

I move on to the imposition of VAT on take-away food. This is a major area of debate, for the Government's proposals will have a direct bearing on the area of society that is represented by my right hon. and hon. Friends and me. We represent those who eat take-away food. In general, we do not represent those who enjoy expense account lunches and dinners at the expense of others, including that of the taxpayer. We represent those whose standard of living is such that they have to depend basically on take-away food, which is now unnecessarily and viciously to be taxed.

A brake is to be put on the phenomenal growth of the take-away food industry. I think that the Chancellor of the Exchequer has been mesmerised by the growth of the McDonald's of this vintage. However, a form of basic provision is that of fish and chips, which working people eat in the industrial cities. The Government's proposals are a blow to that industry and to the employment prospects within it. We see a threat to its further expansion which could create as many jobs as Nissan will bring us. That growth is threatened by the taxation of take-away food.

Mr. Parry

Does my hon. Friend agree that the imposition of VAT on fish and chips and other take-away meals will have a tremendous effect on those who live in inner-city areas, especially pensioners, who in many instances rely on take-away food for their only hot meal of the day? It will have an equally great effect on those with low incomes, including one-parent families

Mr. Mitchell

I agree with my hon. Friend that the Government propose to introduce a tax on those who are least able to afford it. It will be a tax on the small businesses that the Government want to encourage. Fish and chip businesses have been struggling for years. The number of closures of fish friers has been increasing over the years as costs have risen. Last year, a bag of spuds cost £2.80. That was the price paid by a fish and chip shop. The price will rise to £8 this year. The cost of the corn oil was £10.50 and it is now £24.

In addition, these struggling small businesses are being faced with this iniquitous proposal to tax them at 15 per cent., which is causing the sort of outcry and lobbying that we witnessed today, and we get only an echo of it in here in London. The kind of fish and chip take-away that is so basic in the north and in industrial cities is less important in the south, and it is of no importance whatever to well-fed Conservative Members.

Mr. Harry Cohen (Leyton)

Will my hon. Friend confirm that small fish and chip shops will have a big problem in trying to separate the items on which VAT is and is not paid? I have not yet received an answer to an earlier question I asked about a chip butty made with cold bread and hot chips.

Mr. Mitchell

Considering all the financial theology over which the Chancellor puzzled— whether to have little MO, PSL2, M3 or M1 for his sacred religion of monetarism—the paramount question of the VAT rate on a chip buttie must be among the most difficult. Perhaps when he replies the Minister will deal with that basic but philosophical question. [Interruption.]

Mr. Golding

Perhaps we shall see the introduction of a new type of butty, with hot bread outside and cold chips inside, so avoiding VAT. I hope that my hon. Friend will not hurry the section of his contribution with which he is now dealing. There is so much noise coming from the Government Front Bench that if the occupants were on a picket line outside Silverdale colliery, they would have been locked up by now.

Before leaving the VAT issue, will my hon. Friend deal with the plight of schoolchildren who, having been priced out of school dinners, are now being priced out of the chippie by the occupants of the Treasury Bench, who have never known what it is not to have enough to eat? Will my hon. Friend stop being soft on the Government Front Bench?

Mr. Mitchell

I agree with my hon. Friend. School kids have been forced by the escalating price of school dinners to go outside schools, at some danger to themselves, and about the town getting take-away food. That food is now being priced out of reach of their pockets, because the money available to them is not increasing at the rate of that available to Conservative Members.

I represent an area, if not a generation, which was brought up on fish and chips as a basic food. It made me what I am today — gross and overweight, though essentially healthy—and I recall how the Government told people during the war to eat more fish and chips. It was good for the national morale and for the national diet and it saved the importation of food at the expense of ships that were being sunk by submarines. yet this pathetic Government claim that their economic miracles are conditional on the 15 per cent. taxation of fish and chips.

I am reminded of the early days of a newly formed television company, which shall be nameless for the time being, in Yorkshire, when the hon. Member for Thanet, South (Mr. Aitken), as its star reporter, did a spot of ethnic sociology among the natives by taking a film crew to Harry Ramsden's with Colonel Sammy Lohan, the "good food spy," to taste the delights that the working class of Yorkshire had been eating for generations.

The film crew rolled up and set up at Harry Ramsden's. Colonel Sammy Lohan began to eat his fish and chips and professed that they were delicious. "What," piped up the hon. Member for Thanet, South "shall we drink with the fish and chips?" Colonel Sammy Lohan replied, "We need something very dry to cut through the grease. Waitress, we will have a dry white snurple-turple 1950 durple." "Nay," said the waitress, "we serve nowt but tea here. Tha'd best go somewhere else for that." That is the extent of the knowledge of Conservative Members of the fish and chip trade.

Joking aside, take-aways are ethnic as well as small businesses. A large proportion are run by Indians, Chinese and Yorkshire people—all ethnic minorities, who are maintaining their traditional tribal cooking and ethnic dishes to the best of their ability. Those struggling sections of our community, who are trying to maintain that trade, will be hit by the 15 per cent. VAT on fish and chips. That levy is unnecessary.

Mr. Maxton

My hon. Friend has not mentioned the baker's shop that sells hot pies and hot soup to take away. I am not sure of the tax to be imposed on those foods. I have heard that they will be exempt. If so, that will put the fish and chip shops into even more difficulties because the bakers will provide competition by cheaper goods.

Mr. Mitchell

I am grateful to my hon. Friend for raising that issue, because a number of serious anomalies arise. I have put a number of questions on that matter to the Treasury and have not received satisfactory answers.

My hon. Friend the Member for Liverpool, Riverside (Mr. Parry) made the important point that the 15 per cent. VAT charge will hit the unemployed, families with small children, low income families, students and pensioners —people in the midlands, the north and Scotland. The people in those areas depend on fish and chips. They cannot afford sit-down meals. The cost of the average take-away meal is £1.50 or less. It is not the 20 or 30 quid job that is standard for Conservative Members' lunches on expense accounts and SDP Members' lunches on Barclaycard.

One third of take-aways are owned and run by ethnic minorities. The direct taxation is a setback to their efforts to establish themselves in this country and provide a diversity of culinary experience for working-class people.

Mr. Eric Deakins (Walthamstow)

Does my hon. Friend believe that ethnic take-aways are a contribution to a multicultural society, to which Opposition Members are dedicated? Will he consider when he has finished dealing with fish and chips and the working class, whether the Government believe what they say about backing small business?

Mr. Mitchell

That is a typical approach by the Government. It is a matter of linguistics—"Don't watch what I am doing, listen to what I am saying. I am saying that I am encouraging small businesses while small businesses are going bankrupt." That is another blow to small businesses, many of which are struggling financially. I accept my hon. Friend's point. The new diversity in culinary experience—the switch in the north from fish and chips to Chinese take-aways and Indian takeaways—is welcome. It enriches our experience. It is a treat to have many of those meals. All those take-aways are part of the diet of the working class and the less well-off.

Mr. Bill Michie (Sheffield, Heeley)

Is it part of the vicious circle that the Government have stopped local authorities building houses for the working-class young, who have been deprived of a job, so that they are pushed into cheap bedsits and can eat only by using take-aways? Now the take-aways are being attacked.

Mr. Mitchell

That is right. Increasing misery is being imposed on the less well-off in society. The Government are imposing all the benefits of depression, which they have engendered, on the unemployed, the poor, social services beneficiaries, those in the poverty trap and those with large families. Those are the people who turn to takeaway food. They are now being asked to pay a 15 per cent. tax. That is adding culinary insult to economic injury in a way that only the Government, with their callous indifference and lack of knowledge of how people live, feel or eat, could do. Only a Government as remote from the people as this one could have gone in for that completely unnecessary and stupid act. Why is it necessary at this stage? Is it so essential for economic recovery that the Government must impose that tax on the people?

Mr. Bell

My hon. Friend mentioned take-away food, expense accounts and big lunches and said that members of the SDP might use a certain type of credit card. Is he aware that not one member of the SDP has sought to speak or is present in the Chamber? Does that not reflect their interest in matters of finance?

Mr. Mitchell

I am grateful to my hon. Friend for having made that point, because when I was a lad fish and chips were 5d for a fish and twopence-halfpenny for a cake. That was a cake in Yorkshire; not a cake in the rest of the country. It was not that measly, ground-up stuff. It was fish between two layers of potato done in batter. Chips were a penny and one could have double chips for twopence. They were delicious. If the Government have their way, we shall have to have the credit cards used by the SDP to buy the fish and chips which are basic food for our people.

It is no surprise that only one member of the alliance is present. That is par for the course from their performance in the Finance Bill Committee. I know that the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) was full of protestations about what he would do in Committee, but he will not wait if the business comes on after ten o'clock. He will be home in bed, as members of the alliance usually are when the Finance Bill is in Committee. They are always bleating in the papers. There is no problem that cannot be made worse by the right hon. Member for Plymouth, Devonport (Dr. Owen). A great deal is said in the papers, but not in the House and certainly not at all in the Finance Bill Committee.

It is clear from what has leaked out already that the most amazing, incomprehensible anomalies will develop in this basic trade.

I have the notice by the commissioners——

Mr. Roland Boyes (Houghton and Washington)

Mr. Deputy Speaker, this is an important speech — [Interruption.]

Mr. Deputy Speaker

Order. What does the hon. Member want?

Mr. Boyes

I am having discussions with my legal adviser, Mr. Deputy Speaker, on the correct procedure, because I have a problem. [Laughter.] This is an important speech. In fact, it is one of the most important that I have heard.

Mr. Deputy Speaker

Order. Is the hon. Member raising a point of order or seeking to address the House?

Mr. Boyes

I have now decided to change from an intervention to a point of order. [Laughter.] This is an important speech and I am trying to follow it. The argument is becoming a little technical and difficult, so I will ask you to ask the speaker to slow down a little so that we can——

Mr. Deputy Speaker

Order. The hon. Gentleman knows that that is not a point of order.

Mr. Mitchell

Mr. Deputy Speaker, I apologise to you and the House if, in my haste to get through my poor remarks, I am speaking a little too fast for the comprehension of the House. I shall try to observe my hon. Friend's point, but I take it amiss that, when I am dealing with a subject which is important for our people's way of life, hon. Members have no higher sense of social purpose than to laugh like hyenas and the public school hooligans that so many of them are. The way of life in our communities, and take-away food, may not be important to them, but previous Governments have had some sense of social commitment. Even if this Government do not have such a commitment, they should at least listen to important speeches like this.

I turn now to the——

Mr. Peter Pike (Burnley)

In regard to the importance of the point that my hon. Friend has been making about tax on take-away food, on which my hon. Friends are all agreed, will he, before he leaves the subject of VAT, deal with the VAT on building alterations, in addition to the problems caused by cuts in grants, in view of the number of unemployed building workers?

Mr. Mitchell

I do not think that many extensions to fish and chip shops will be built over the next few years. If they were, the proprietors would feel a double sense of aggravation because of the actions of the Government. This kind of legislation, which is easily thought of by a bright Chancellor, dewy-eyed and bushy-tailed, wanting to make an impression, is difficult and complicated to administer, as this notice from the Commissioners of Customs and Excise on value added tax on hot food and drink indicates. It shows the kind of anomalies which will arise. On page 2 "hot" food is defined as "above room temperature." Room temperature in a sweltering chippie in the middle of a tropical Sowerby Bridge summer or in Grimsby when the sun shines is very different from room temperature in the winter. It continues: Certain freshly cooked food which is customarily consumed cold, such as a loaf of bread, may be zero-rated even if you sell it before it has had a chance to cool down. So one does not have to wait for the bread to cool. It goes on: Where a supply of hot food includes an essential ingredient which is cold, such as the bread roll enclosing a hot dog or hamburger, you should treat the whole supply as liable at the standard rate. Does that include chip butties? If it includes chip butties, does it include sausage rolls? There is no definition of a hot sausage roll in this document.

The document goes on: The incidental provision of cold items which are not separately charged for, such as a dollop of mustard, tomato sauce or chutney, should be ignored. That is progress. We can ignore chutney and tomato sauce. What a liberalisation of procedures the Government have given us.

Here are some examples of food which attract standard rate of VAT if they are sold hot: Fish and chips, chicken and chips, pie and chips, etc., chips sold on their own;"— There is no definition of a chip butties but chips sold on their own cannot be zero-rated— Chinese, Indian, Greek, Italian and similar take away meals and dishes;— there is nothing about ethnic Yorkshire pudding— hot dogs and hamburgers, pies and pasties, toased sandwiches, cups of tea, coffee, chocolate, etc; cups of soup:"— there is nothing about bowls of soup— roasted chesnuts. Here are some examples of food which may be zero-rated unless they are sold—

Mr. Bell

Is there any reference to black puddings? This came up earlier and a Minister of the Crown said that black pudding was eaten cold, which showed the ignorance of certain Ministers of the Crown about the eating habits in the north-east and possibly in Scotland. Is black pudding mentioned in the list which my hon. Friend has?

Mr. Mitchell

There is no mention of black pudding, but the point my hon. Friend refers to shows how out of touch Government Members can be. The junior Minister at the Department of Health and Social Security actually went on television in the north and said in most fish and chip shops the food was eaten on the premises, which shows how much he knows about fish and chips.

Mr. Corbyn

I have been following very closely my hon. Friend's arguments about the VAT payments on take-away food. There seems to be a misapprehension in the House that the majority of take-away restaurants are fish and chip shops, whereas in my constituency that is not the case. They are kebab and tandoori take-aways. It is on this point that I should like my hon. Friend to help me. Can he tell me whether or not a doner kebab would be zero-rated as against a shish kebab because a doner kebab often has a cold outside pastry, although sometimes it is lightly toasted? Can he help on this point?

Mr. Mitchell

I only wish I could; I would be eager to do so. I hope that the Minister, in his concluding remarks, will tell us what the trade can expect, because the proposal is causing much anxiety in a trade that is at present having a difficult time.

Mr. Boyes

Will my hon. Friend tell the House whether the document to which he has referred says anything about the very important meals-on-wheels services that are run for elderly people? Some of us are very concerned that those services might be VAT-rated. People might think that that is a ridiculous idea, but in view of the calibre of Conservative Ministers it would not surprise me if they decided to VAT-rate the meals-on-wheels services, because they could come under the definition of a take-away meal service.

Mr. Mitchell

It does not say—

The Parliamentary Secretary to the Treasury (Mr. John Wakeham)

rose in his place and claimed to move, That the Question be now put.

Question put, That the Question be now put:—

The House proceeded to a Division:

Mr. Allan Roberts (seated and covered)

On a point of order, Mr. Speaker. The point of order concerns the moving of the closure on the Second Reading of a Finance Bill, in the light of what is said in "Erskine May" at page 837: Debate on main stages Second reading Debate and amendment on the second and third reading of bills introduced on Ways and Means resolutions are governed by the ordinary rules of relevancy. On the second reading of the Finance Bill, however, a general review of national finance is normally permitted. There has not been a motion for the closure of a debate on the Second Reading of a Finance Bill since 1925, when the closure was moved——

Mr. Deputy Speaker

Order. I have to tell the hon. Gentleman that the question of the acceptance of a closure motion is in the absolute discretion of the occupant of the Chair, and that cannot be challenged.

Mr. Roberts

While accepting that, Mr. Deputy Speaker, may I add that the closure was moved by Mr. Winston Churchill on 25 May 1925 and was opposed by the then Captain Wedgwood Benn. It resulted three days later on 28 May—this is what I want to avoid, while accepting your ruling—in a motion of censure against the Chair for accepting the closure. There was a major day's debate on it. That is the precedent that the Government are now——

Mr. Deputy Speaker

Order. The House can be reassured by the fact that what we are doing now is not unprecedented. But I must repeat that the acceptance of a closure motion is a matter for the absolute discretion of the Chair and cannot be challenged.

Mr. Bennett (seated and covered)

On a point of order, Mr. Deputy Speaker. May I draw your attention to the Standing Orders of the House, which make it absolutely clear——

Mr. Deputy Speaker

Order. The Question is, That the Question be now put. As many as are of that opinion say "Aye" [HON. MEMBERS: "Aye".] To the contrary "No". [HON. MEMBERS: "No".]

Tellers for the Ayes, Mr. David Hunt and Mr. Ian Lang. Tellers for the Noes, Mr. Norman Hogg and Mr. Allan McKay.

Now I will take the point of order. Mr. Andrew Bennett.

Mr. Bennett (seated and covered)

On a point of order, Mr. Deputy Speaker. May I draw your attention to the Standing Orders of the House, which make it clear that on the Second Reading of the Finance Bill the House expects the debate to run for at least six and a half hours, because there is no requirement in the Standing Orders for the 10 o'clock rule to apply. If the debate is expected to last for at least six and a half hours, it would then be reasonable for the Chair to accept speeches from the Front Bench spokesmen in reply to the debate before a Closure motion is accepted.

For the Chair to rule that it is entitled to accept a Closure motion at any time is perfectly reasonable, provided that it does not contravene the Standing Orders of the House, which make it clear that on the Finance Bill we are entitled to more than the normal six and a half hours of a Second Reading debate. Therefore, I respectfully ask you to reconsider your decision to accept the Closure motion when the Front Bench spokesmen have not had an opportunity to reply to the debate. It is clear that the House has the right to have its Standing Orders adhered to.

Mr. Deputy Speaker

Order. I must draw to the hon. Gentleman's attention the fact that the House has been debating the Second Reading for seven hours. It is for the House to decide whether it wishes to continue the debate——

Mr. Maxton (seated and covered)

On a point or order, Mr. Deputy Speaker.

Mr. Deputy Speaker

Order. I am dealing with one point of order at a time. It is for the House to decide now whether it wishes the debate to continue, and its will is being expressed in the Lobbies. The Tellers must take up their positions.

Mr. Maxton (seated and covered)

On a point of order, Mr. Deputy Speaker. Although I do not challenge your right to rule on the Closure motion, I challenge the constitutional right of a member of Her Majesty's Household to move that motion. A basic constitutional right of the House is that the Monarchy should not interfere in its tax-raising powers. For a member of the Queen's Household to move that motion is an interference in the constitutional rights of the House——

Mr. Deputy Speaker

Order. Nothing in the Standing Orders prevents any member of the Government from moving such a motion.

Mr. Bell (seated and covered)

On a point of order, Mr. Deputy Speaker.

Mr. Deputy Speaker

Order. Before I take a further point of order, I remind the House that the Tellers must be in their positions.

Mr. Bell (seated and covered)

On a point of order, Mr. Deputy Speaker. Although I do not wish to challenge your ruling, I wish to say that the traditional role of our legislature has suffered badly from the growth of Government during the past quarter of a century. It was my understanding that the Government would seek to make Parliament effective, in its job of controlling the Executive. Those words come from the Conservative manifesto of 1979——

Mr. Deputy Speaker

Order. The hon. Gentleman sought to address the House on a point of order. What is it?

Mr. Bell (seated and covered)

My point of order is that the legislature as a whole has suffered badly tonight at the hands of the Executive.

Mr. Deputy Speaker

That is an opinion, not a point of order.

Mr. Hoyle (seated and covered)

On a point of order, Mr. Deputy Speaker. Although I do not in any way challenge your ruling, since this sort of thing has not happened in debates on Finance Bills since 1925 would you consider whether there is a constitutional point here as to why it should happen now? Is it not because the Government wish to steamroller their legislation through the House?

Mr. Deputy Speaker

It is not unusual in this place to do things on ancient precedents. I am glad that the hon. Gentleman reminds the House that this is not unprecedented.

Mr. Gerald Bermingham(seated and covered) (St. Helens, South)

On a point of order, Mr. Deputy Speaker. Is it not a fact that your calling for Tellers to be appointed while points of order are being taken is a denial of the right of the House to raise matters of constitutional importance——

Mr. Deputy Speaker

Order. Hon. Members should know sufficiently well that Mr. Speaker or the occupant of the Chair cannot take a point of order while the Question is being put. I have dealt with the points of order that were raised subsequently.

Mr. Bermingham (seated and covered)

Further to that point of order, Mr. Deputy Speaker. Is it not the right of any Member of the House to raise a point of order at any time? Has it not been traditional for a number of centuries that in the event of a vote being called a Member has the right, from a sedentary position, to raise a point of order, and is it not in the interests of the House that that point of order be taken at the appropriate time—that is to say, now?

Mr. Deputy Speaker

I may have misunderstood the hon. Gentleman. I thought that he was challenging my decision to put the Question at a moment when some hon. Members were on their feet. If that is not so, I apologise to the hon. Gentleman and ask him what his point of order is now.

Mr. Bermingham (seated and covered)

My point of order is very simple. There comes a point in time when a Member of Parliament has the right to have his say on the matter of raising taxation. A Member of Her Majesty's Government who holds office under the Crown has moved the closure, thus denying many of us the right to raise points about the raising of taxes in this Second Reading debate on the Finance Bill. Accordingly, many of us feel that we have been denied our rights as Members of the House to express our views. Accordingly, I ask that the vote should not be taken.

Mr. Deputy Speaker

I understand the hon. Gentleman's resentment, but the point that he raises is not a point of order. I repeat again that it is a matter for the absolute discretion of the occupant of the Chair whether to accept a closure motion.

Lock the doors!

Ms. Clare Short(seated and covered) (Birmingham, Ladywood)

On a point of order, Mr. Deputy Speaker——

Mr. Deputy Speaker

Order. The hon. Lady does not need to wear a hat. That is known as discrimination, I believe.

Ms. Short

Many of us have waited a long time to raise points on the Finance Bill today. We put in our names to Mr. Speaker a considerable time ago and there are points that we wish to raise which have not been raised at all in the discussion so far—in particular, the non-payment of the long-term rate of supplementary benefit to the long-term unemployed. There seems to be an important question as to whether you are penalising some hon. Members because others have spoken for a very long time. As it is the duty of the Chair to protect the interests of all hon. Members, it seems to me that that might be an unfair ruling.

Mr. Deputy Speaker

I repeat once again that at this moment the decision as to whether the debate should continue is not in my hands but in the hands of the House. It is for Members themselves to decide by their votes in the Lobbies whether the debate should continue. I merely give the House the opportunity to make that decision.

Mr. Bermingham (seated and covered)

On a point of order, Mr. Deputy Speaker. On behalf of myself and many other Opposition Members, I wish to raise a very serious point of order. I note that the doors are now locked. Having sought to raise certain constitutional matters, I and many of my colleagues are now denied the right to register our protest.

Accordingly, on behalf of Members of the House, I call your attention to the absolute right, going back not just to Magna Carta—[HON. MEMBERS: "Further! Further!"] I cannot apologise too profusely, Mr. Deputy Speaker, on behalf of the ignorant who lie beneath me and who have little or no respect for democracy or the rights of my constituents and those of my colleagues who are now denied the right to vote, the officials of the House having sought to bar our right of entry into the Lobby because we have sought to stand upon our constitutional rights to protect the rights of our constituents and to challenge the rulings that have been made.

Is it not an abuse of the rights of a Member of Parliament if, because he seeks to use the procedures of the House to protect his rights, he is denied the right to vote——

Mr. Deputy Speaker

Order. The hon. Gentleman has made his point. I must remind him that it is not I but the Standing Orders that determine the period that shall elapse before the doors are locked. I am entitled to remind the hon. Gentleman that on, I think, two occasions I reminded the House that the Division was taking place.

Mr. Hoyle (seated and covered)

On a point of order, Mr. Deputy Speaker. While in no way wishing to challenge your ruling, nevertheless I am sure that as a good democrat you must be concerned that many hon. Members have been denied the right to vote on the question of the closure. I should like your ruling on that. After all, we were exercising our democratic right to say why the closure should not be moved. Now we shall even be denied the right to vote on it and our constituents will be watching this most carefully.

Mr. Deputy Speaker

I am not quite sure what the hon. Gentleman meant by his latter remark. I say again that the House had ample opportunity to get into the Lobby in the time that is laid down in the Standing Orders.

Mr. Bell (seated and covered)

On a point of order, Mr. Deputy Speaker. While in no way seeking to challenge your ruling, may I say on a point of order that it is a matter of great concern to our constituents that we have not been able to vote in this important Division on an important Finance Bill?

Mr. Deputy Speaker

The hon. Gentleman started by saying that he would not challenge my ruling and then proceeded to do precisely that. I have ruled on the matter.

Mr. Bermingham (seated and covered)

On a point of order, Mr. Deputy Speaker. While not wishing to challenge your ruling or in any way to show discourtesy to the House, I should like you, Mr. Deputy Speaker, to advise new hon. Members as to how we can proceed to the Division Lobbies while exercising our constitutional right to challenge the ruling of the House on a point of order? If I recall the position correctly, the challenges began, as far as I was concerned, at a moment of time when you were seeking to call the second ayes and noes—if I may put it that way—and the Tellers had been put in their place. If an hon. Member wishes to exercise his democratic rights, perhaps somebody could at some stage explain how they can be exercised by an hon. Member while remaining in a sedentary position which is necessary during a vote and how he can proceed through the Lobbies while, exercising his right to challenge——

Mr. Deputy Speaker

The hon. Gentleman is doing the same as the hon. Member for Middlesbrough (Mr. Bell). He starts by saying that he is not challenging my ruling and then proceeds to challenge a ruling that I gave earlier. I have ruled.

Mr. Bell (seated and covered)

On a point of order, Mr. Deputy Speaker.

Mr. Deputy Speaker

I shall take the point of order in a moment. I understand that there is some difficulty and delay in the Lobby. Will the Serjeant at Arms inquire into what is delaying progress in the Lobby?

Mr. Bell (seated and covered)

On a point of order, Mr. Deputy Speaker. [Interruption.]

Mr. Deputy Speaker

Order. I am trying to listen to a point of order.

Mr. Bell (seated and covered)

While in no way wishing to challenge your ruling, Mr. Deputy Speaker, will you give advice to those hon. Members who have sat patiently all evening wishing to make an intervention with a view to being a member of the Finance Bill Committee? What advice must we now give to our Whips office in the event of our wishing to be on that Committee?

Mr. Deputy Speaker

I am sure that the hon. Gentleman knows his way to his Whips' office and knows how to put in a bid for a Standing Committee, if that is what is concerning him. Membership of Standing Committees is not a matter for me at all. As to the hon. Gentleman wishing to address the House on the Finance Bill, I am bound to point out to him that frustration on the part of would-be speech makers is a part of life here.

Mr. Winnick (seated and covered)

On a point of order, Mr. Deputy Speaker. As the Government are trying to deny the House the opportunity to debate the Finance Bill, which is our most important job as regards tax and Inland Revenue matters, I suggest that Mr. Speaker should be asked to come to the House.

I mean no disrespect to you, Mr. Deputy Speaker, but, as my hon. Friends have pointed out, no such closure motion has been moved since 1925 and I respectfully urge that Mr. Speaker be asked to hear our points of order.

Mr. Deputy Speaker

I do not think that it is necessary to rouse Mr. Speaker from his slumbers. The House is quite capable of handling the situation itself.

Mr. Winnick (seated and covered)

On a point of order, Mr. Deputy Speaker. I mean no disrespect to you, but will you accept my suggestion that a deputation of hon. Members should now go to Mr. Speaker in his residence to explain the situation to him and to express our strong belief that, on the basis of a ministerial motion, we are being denied our right to vote? On such a serious issue, Mr. Speaker's presence should be requested, and we should go to see him before any further progress is made.

Mr. Deputy Speaker

That is not a point of order. I have ruled on that matter and I see no reason to vary my ruling.

Mr. Hoyle (seated and covered)

On a point of order, Mr. Deputy Speaker. I do not wish to challenge your ruling, but do you accept that aggrieved hon. Members who have not been able to cast their votes should go to see Mr. Speaker, because they have been denied the opportunity to vote on the taxes that will be levied on their constituents? I feel that we should be allowed to go to Mr. Speaker. We should be allowed to vote, because our constituents will expect that of us.

Mr. Deputy Speaker

Any hon. Member who was in the House when the Division was called has only himself to blame if he failed to get into the Lobbies. The procedure on this Division has been no different from that on all the Divisions in which the hon. Gentleman has participated in all his years in the House.

Mr. Bell (seated and covered)

On a point of order, Mr. Deputy Speaker. I do not wish to challenge any of your rulings, but in the light of your discussion with the Serjeant at Arms, will you reconsider your decision on the question of our voting on such a vital matter as the Finance Bill?

Mr. Deputy Speaker

Order. The discussions that I have had with the Serjeant at Arms have nothing whatever to do with points of order and the matters that have been discussed so far.

Mr. Bermingham

On a point of order, Mr. Deputy Speaker. While not in any way wishing to challenge your rulings and appreciating the difficulties in which you find yourself, perhaps it could be explained to the House how hon. Members, if they are to be courteous to the House —that is to say if they are to listen to your reply to points of order and consider the points that arise from it —can do that and cast a vote. I cannot understand how an hon. Member can exercise his constitutional right to make those representations and at the same time proceed through the Division Lobby. The holder of the Chair is historically an important part of the House and is said to be the protector of our rights in regard to the Executive. If that is to continue and if we are to advance our arguments and do you the courtesy of listening to your reply, there is surely no way in which we can be here and in the Division Lobby at the same time. Mr. Deputy Speaker——

Mr. Deputy Speaker

Order. I have ruled on that matter more than once. I must point out to the hon. Gentleman that it is not unique for hon. Members to raise a point of order during a Division and to cast a vote. Moreover, if every time an hon. Member tried to raise a point of order during a Division the Division had to be delayed to allow him to cast a vote, we should never get through any Divisions.

Mr. Winnick

On a point of order, Mr. Deputy Speaker.

Mr. Deputy Speaker

Will the Tellers take their places?

Mr. Winnick

On a point of order, Mr. Deputy Speaker.

Mr. Deputy Speaker

Will the Tellers take their places?

Mr. Winnick

On a point of order, Mr. Deputy Speaker.

Mr. Deputy Speaker

Order, order.

The House having divided: Ayes 220, Noes 108.

Division No. 241]	[2 am
AYES
Aitken, Jonathan	Budgen, Nick
Alexander, Richard	Bulmer, Esmond
Amess, David	Burt, Alistair
Ancram, Michael	Carlile, Alexander (Montg'y)
Arnold, Tom	Carlisle, John (N Luton)
Ashby, David	Carlisle, Kenneth (Lincoln)
Aspinwall, Jack	Carttiss, Michael
Atkins, Rt Hon Sir H.	Channon, Rt Hon Paul
Atkins, Robert (South Ribble)	Chapman, Sydney
Atkinson, David (B'm'th E)	Chope, Christopher
Baker, Rt Hon K. (Mole Vall'y)	Churchill, W. S.
Baker, Nicholas (N Dorset)	Clark, Hon A. (Plym'th S'n)
Baldry, Anthony	Clark, Dr Michael (Rochford)
Banks, Robert (Harrogate)	Clarke, Rt Hon K. (Rushcliffe)
Batiste, Spencer	Cockeram, Eric
Bellingham, Henry	Colvin, Michael
Bendall, Vivian	Conway, Derek
Benyon, William	Coombs, Simon
Berry, Sir Anthony	Cope, John
Best, Keith	Couchman, James
Bevan, David Gilroy	Currie, Mrs Edwina
Biggs-Davison, Sir John	Dorrell, Stephen
Blaker, Rt Hon Sir Peter	Douglas-Hamilton, Lord J.
Bonsor, Sir Nicholas	Dover, Den
Boscawen, Hon Robert	Dunn, Robert
Bowden, A. (Brighton K'to'n)	Durant, Tony
Bowden, Gerald (Dulwich)	Edwards, Rt Hon N. (P'broke)
Boyson, Dr Rhodes	Evennett, David
Brandon-Bravo, Martin	Eyre, Sir Reginald
Bright, Graham	Fairbairn, Nicholas
Brinton, Tim	Fallon, Michael
Brittan, Rt Hon Leon	Farr, John
Brooke, Hon Peter	Favell, Anthony
Brown, M. (Brigg & Cl'thpes)	Forman, Nigel
Browne, John	Forsyth, Michael (Stirling)
Bruinvels, Peter	Fox, Marcus
Buck, Sir Antony	Franks, Cecil

Freeman, Roger	Raison, Rt Hon Timothy
Gale, Roger	Rees, Rt Hon Peter (Dover)
Galley, Roy	Rhodes James, Robert
Gardiner, George (Reigate)	Robinson, Mark (N'port W)
Garel-Jones, Tristan	Roe, Mrs Marion
Goodhart, Sir Philip	Rossi, Sir Hugh
Good lad, Alastair	Rost, Peter
Gorst, John	Rowe, Andrew
Greenway, Harry	Rumbold, Mrs Angela
Gregory, Conal	Ryder, Richard
Griffiths, E. (B'y St Edm'ds)	Sainsbury, Hon Timothy
Griffiths, Peter (Portsm'th N)	Sayeed, Jonathan
Ground, Patrick	Shaw, Sir Michael (Scarb')
Grylls, Michael	Shelton, William (Streatham)
Hamilton, Hon A. (Epsom)	Shepherd, Colin (Hereford)
Hamilton, Neil (Tatton)	Shepherd, Richard (Aldridge)
Hampson, Dr Keith	Shersby, Michael
Hannam, John	Silvester, Fred
Harvey, Robert	Sims, Roger
Haselhurst, Alan	Skeet, T. H. H.
Hawkins, C. (High Peak)	Smith, Tim (Beaconsfield)
Hawkins, Sir Paul (SW N'folk)	Soames, Hon Nicholas
Hawksley, Warren	Speed, Keith
Hayes, J.	Speller, Tony
Hayward, Robert	Spencer, Derek
Heathcoat-Amory, David	Spicer, Michael (S Worcs)
Henderson, Barry	Squire, Robin
Hickmet, Richard	Stanbrook, Ivor
Hicks, Robert	Stanley, John
Higgins, Rt Hon Terence L.	Steen, Anthony
Hill, James	Stern, Michael
Hind, Kenneth	Stevens, Lewis (Nuneaton)
Hirst, Michael	Stevens, Martin (Fulham)
Hogg, Hon Douglas (Gr'th'm)	Stewart, Allan (Eastwood)
Holland, Sir Philip (Gedling)	Stewart, Andrew (Sherwood)
Holt, Richard	Stewart, Ian (N Hertf'dshire)
Hooson, Tom	Stokes, John
Hordern, Peter	Sumberg, David
Howarth, Alan (Stratf'd-on-A)	Tapsell, Peter
Howell, Rt Hon D. (G'ldford)	Taylor, Teddy (S'end E)
Howell, Ralph (N Norfolk)	Temple-Morris, Peter
Hubbard-Miles, Peter	Terlezki, Stefan
Hunt, John (Ravensbourne)	Thomas, Rt Hon Peter
Hunter, Andrew	Thompson, Donald (Calder V)
Hurd, Rt Hon Douglas	Thompson, Patrick (N'ich N)
Johnson-Smith, Sir Geoffrey	Thorne, Neil (Ilford S)
Jones, Gwilym (Cardiff N)	Thornton, Malcolm
Jones, Robert (W Herts)	Thurnham, Peter
Jopling, Rt Hon Michael	Townend, John (Bridlington)
Joseph, Rt Hon Sir Keith	Tracey, Richard
Key, Robert	Trotter, Neville
King, Roger (B'ham N'field)	Twinn, Dr Ian
King, Rt Hon Tom	van Straubenzee, Sir W.
Knight, Gregory (Derby N)	Vaughan, Sir Gerard
Knight, Mrs Jill (Edgbaston)	Viggers, Peter
Knowles, Michael	Waddington, David
Knox, David	Wakeham, Rt Hon John
Lamont, Norman	Walden, George
Lawler, Geoffrey	Waller, Gary
Leigh, Edward (Gainsbor'gh)	Wardle, C. (Bexhill)
Lennox-Boyd, Hon Mark	Watson, John
Lilley, Peter	Watts, John
Lloyd, Peter, (Fareham)	Wells, Bowen (Hertford)
Lyell, Nicholas	Wells, John (Maidstone)
McCurley, Mrs Anna	Wheeler, John
MacGregor, John	Whitfield, John
Major, John	Winterton, Mrs Ann
Mather, Carol	Winterton, Nicholas
Mawhinney, Dr Brian	Wolfson, Mark
Moore, John	Wood, Timothy
Morris, M. (N'hampton, S)	Yeo, Tim
Neubert, Michael
Page, John (Harrow W)	Tellers for the Ayes:
Pattie, Geoffrey	Mr. David Hunt and Mr. Ian Lang.
Powley, John

NOES
Alton, David	Beckett, Mrs Margaret
Archer, Rt Hon Peter	Beith, A. J.
Barron, Kevin	Benn, Tony

Bennett, A. (Dent'n & Red'sh)	Lloyd, Tony (Stretford)
Boyes, Roland	Lofthouse, Geoffrey
Brown, Gordon (D'f'mline E)	McDonald, Dr Oonagh
Brown, N. (N'c'tle-u-Tyne E)	McGuire, Michael
Brown, Ron (E'burgh, Leith)	McKelvey, William
Bruce, Malcolm	McNamara, Kevin
Callaghan, Jim (Heyw'd & M)	McTaggart, Robert
Canavan, Dennis	Marek, Dr John
Clarke, Thomas	Martin, Michael
Clay, Robert	Maxton, John
Cocks, Rt Hon M. (Bristol S.)	Meadowcroft, Michael
Cohen, Harry	Mikardo, Ian
Cook, Robin F. (Livingston)	Miller, Dr M. S. (E Kilbride)
Corbett, Robin	Mitchell, Austin (G't Grimsby)
Corbyn, Jeremy	Morris, Rt Hon A. (W'shawe)
Cowans, Harry	Nellist, David
Craigen, J. M.	Oakes, Rt Hon Gordon
Cunliffe, Lawrence	O'Brien, William
Davies, Rt Hon Denzil (L'lli)	O'Neill, Martin
Davis, Terry (B'ham, H'ge H'l)	Patchett, Terry
Deakins, Eric	Pavitt, Laurie
Dewar, Donald	Pike, Peter
Dixon, Donald	Prescott, John
Dormand, Jack	Redmond, M.
Dubs, Alfred	Richardson, Ms Jo
Duffy, A. E. P.	Roberts, Allan (Bootle)
Dunwoody, Hon Mrs G.	Robertson, George
Eastham, Ken	Rooker, J. W.
Evans, John (St. Helens N)	Ross, Ernest (Dundee W)
Fatchett, Derek	Rowlands, Ted
Field, Frank (Birkenhead)	Sedgemore, Brian
Fields, T. (L'pool Broad Gn)	Sheerman, Barry
Fisher, Mark	Sheldon, Rt Hon R.
Flannery, Martin	Short, Ms Clare (Ladywood)
Foster, Derek	Short, Mrs R.(W'hampt'n NE)
Foulkes, George	Silkin, Rt Hon J.
Fraser, J. (Norwood)	Skinner, Dennis
Freeson, Rt Hon Reginald	Smith, C.(Isl'ton S & F'bury)
George, Bruce	Smith, Rt Hon J. (M'kl'ds E)
Golding, John	Soley, Clive
Gould, Bryan	Spearing, Nigel
Hamilton, James (M'well N)	Strang, Gavin
Harrison, Rt Hon Walter	Tinn, James
Hart, Rt Hon Dame Judith	Wallace, James
Haynes, Frank	Wardell, Gareth (Gower)
Holland, Stuart (Vauxhall)	Wareing, Robert
Hughes, Sean (Knowsley S)	Welsh, Michael
Hughes, Simon (Southwark)	Williams, Rt Hon A.
Janner, Hon Greville	Woodall, Alec
Kennedy, Charles
Kirkwood, Archibald	Tellers for the Noes:
Lewis, Terence (Worsley)	Mr. Norman Hogg and Mr. Allen McKay.
Litherland, Robert

Question accordingly agreed to.

Question put accordingly, That the Bill be now read a Second time:—

The House Divided: Ayes 218, Noes 121.

Division No. 242]	[2.27 am
AYES
Aitken, Jonathan	Berry, Sir Anthony
Alexander, Richard	Best, Keith
Amess, David	Bevan, David Gilroy
Ancram, Michael	Biggs-Davison, Sir John
Arnold, Tom	Blaker, Rt Hon Sir Peter
Ashby, David	Bonsor, Sir Nicholas
Aspinwall, Jack	Boscawen, Hon Robert
Atkins, Rt Hon Sir H.	Bowden, A. (Brighton K'to'n)
Atkins, Robert (South Ribble)	Bowden, Gerald (Dulwich)
Atkinson, David (B'm'th E)	Boyson, Dr Rhodes
Baker, Rt Hon K. (Mole Vall'y)	Brandon-Bravo, Martin
Baker, Nicholas (N Dorset)	Bright, Graham
Baldry, Anthony	Brinton, Tim
Banks, Robert (Harrogate)	Brittan, Rt Hon Leon
Batiste, Spencer	Brooke, Hon Peter
Bellingham, Henry	Brown, M. (Brigg & Cl'thpes)
Bendall, Vivian	Browne, John
Benyon, William	Bruinvels, Peter

Buck, Sir Antony	Hunter, Andrew
Budgen, Nick	Hurd, Rt Hon Douglas
Bulmer, Esmond	Johnson-Smith, Sir Geoffrey
Burt, Alistair	Jones, Gwilym (Cardiff N)
Carlisle, John (N Luton)	Jones, Robert (W Herts)
Carlisle, Kenneth (Lincoln)	Jopling, Rt Hon Michael
Carttiss, Michael	Joseph, Rt Hon Sir Keith
Channon, Rt Hon Paul	Key, Robert
Chapman, Sydney	King, Roger (B'ham N'field)
Chope, Christopher	King, Rt Hon Tom
Churchill, W. S.	Knight, Gregory (Derby N)
Clark, Hon A. (Plym'th S'n)	Knight, Mrs Jill (Edgbaston)
Clark, Dr Michael (Rochford)	Knowles, Michael
Clarke, Rt Hon K. (Rushcliffe)	Knox, David
Cockeram, Eric	Lamont, Norman
Colvin, Michael	Lawler, Geoffrey
Conway, Derek	Leigh, Edward (Gainsbor'gh)
Coombs, Simon	Lennox-Boyd, Hon Mark
Cope, John	Lilley, Peter
Couchman, James	Lloyd, Peter, (Fareham)
Currie, Mrs Edwina	Lyell, Nicholas
Dorrell, Stephen	McCurley, Mrs Anna
Douglas-Hamilton, Lord J.	MacGregor, John
Dover, Den	Major, John
Dunn, Robert	Mather, Carol
Durant, Tony	Mawhinney, Dr Brian
Edwards, Rt Hon N. (P'broke)	Moore, John
Evennett, David	Morris, M. (N'hampton, S)
Eyre, Sir Reginald	Neubert, Michael
Fairbairn, Nicholas	Page, John (Harrow W)
Farr, John	Pattie, Geoffrey
Favell, Anthony	Powley, John
Forman, Nigel	Raison, Rt Hon Timothy
Forsyth, Michael (Stirling)	Rees, Rt Hon Peter (Dover)
Fox, Marcus	Robinson, Mark (N'port W)
Franks, Cecil	Roe, Mrs Marion
Fraser, Peter (Angus East)	Rossi, Sir Hugh
Freeman, Roger	Rost, Peter
Gale, Roger	Rowe, Andrew
Galley, Roy	Rumbold, Mrs Angela
Gardiner, George (Reigate)	Ryder, Richard
Garel-Jones, Tristan	Sainsbury, Hon Timothy
Goodhart, Sir Philip	Sayeed, Jonathan
Goodlad, Alastair	Shaw, Sir Michael (Scarb')
Gorst, John	Shelton, William (Streatham)
Greenway, Harry	Shepherd, Colin (Hereford)
Gregory, Conal	Shepherd, Richard (Aldridge)
Griffiths, E. (B'y St Edm'ds)	Shersby, Michael
Griffiths, Peter (Portsm'th N)	Silvester, Fred
Ground, Patrick	Sims, Roger
Grylls, Michael	Skeet, T. H. H.
Hamilton, Hon A. (Epsom)	Smith, Tim (Beaconsfield)
Hamilton, Neil (Tatton)	Soames, Hon Nicholas
Hampson, Dr Keith	Speed, Keith
Hannam, John	Speller, Tony
Harvey, Robert	Spencer, Derek
Haselhurst, Alan	Spicer, Michael (S Worcs)
Hawkins, C. (High Peak)	Squire, Robin
Hawkins, Sir Paul (SW N'folk)	Stanbrook, Ivor
Hawksley, Warren	Stanley, John
Hayes, J.	Steen, Anthony
Hayward, Robert	Stern, Michael
Heathcoat-Amory, David	Stevens, Lewis (Nuneaton)
Henderson, Barry	Stevens, Martin (Fulham)
Hickmet, Richard	Stewart, Allan (Eastwood)
Hicks, Robert	Stewart, Andrew (Sherwood)
Higgins, Rt Hon Terence L.	Stewart, Ian (N Hertf'dshire)
Hill, James	Stokes, John
Hind, Kenneth	Sumberg, David
Hirst, Michael	Tapsell, Peter
Hogg, Hon Douglas (Gr'th'm)	Taylor, Teddy (S'end E)
Holland, Sir Philip (Gedling)	Temple-Morris, Peter
Holt, Richard	Terlezki, Stefan
Hooson, Tom	Thomas, Rt Hon Peter
Hordern, Peter	Thompson, Donald (Calder V)
Howarth, Alan (Stratf'd-on-A)	Thompson, Patrick (N'ich N)
Howell, Rt Hon D. (G'ldford)	Thorne, Neil (llford S)
Howell, Ralph (N Norfolk)	Thornton, Malcolm
Hubbard-Miles, Peter	Thurnham, Peter
Hunt, John (Ravensbourne)	Townend, John (Bridlington)

Tracey, Richard	Wells, Bowen (Hertford)
Trotter, Neville	Wells, John (Maidstone)
Twinn, Dr Ian	Wheeler, John
van Straubenzee, Sir W.	Whitfield, John
Vaughan, Sir Gerard	Winterton, Mrs Ann
Viggers, Peter	Winterton, Nicholas
Waddington, David	Wolfson, Mark
Wakeham, Rt Hon John	Wood, Timothy
Walden, George	Yeo, Tim
Waller, Gary
Wardle, C. (Bexhill)	Tellers for the Ayes:
Watson, John	Mr. Ian Lang and Mr. David Hunt.
Watts, John

NOES
Alton, David	Kirkwood, Archibald
Archer, Rt Hon Peter	Leadbitter, Ted
Barron, Kevin	Leighton, Ronald
Beckett, Mrs Margaret	Lewis, Terence (Worsley)
Beith, A. J.	Litherland, Robert
Bell, Stuart	Lloyd, Tony (Stretford)
Benn, Tony	Lofthouse, Geoffrey
Bennett, A. (Dent'n & Red'sh)	McDonald, Dr Oonagh
Bermingham, Gerald	McGuire, Michael
Boyes, Roland	McKelvey, William
Brown, Gordon (D'f'mline E)	McNamara, Kevin
Brown, N. (N'c'tle-u-Tyne E)	McTaggart, Robert
Brown, Ron (E'burgh, Leith)	Marek, Dr John
Bruce, Malcolm	Martin, Michael
Callaghan, Jim (Heyw'd & M)	Maxton, John
Canavan, Dennis	Meadowcroft, Michael
Carlile, Alexander (Montg'y)	Michie, William
Clarke, Thomas	Mikardo, Ian
Clay, Robert	Miller, Dr M. S. (E Kilbride)
Cocks, Rt Hon M. (Bristol S.)	Morris, Rt Hon A. (W'shawe)
Cohen, Harry	Nellist, David
Cook, Robin F. (Livingston)	Oakes, Rt Hon Gordon
Corbett, Robin	O'Brien, William
Corbyn, Jeremy	O'Neill, Martin
Cowans, Harry	Parry, Robert
Craigen, J. M.	Patchett, Terry
Cunliffe, Lawrence	Pavitt, Laurie
Davies, Rt Hon Denzil (L'lli)	Pike, Peter
Davis, Terry (B'ham, H'ge H'l)	Prescott, John
Deakins, Eric	Randall, Stuart
Dewar, Donald	Redmond, M.
Dixon, Donald	Richardson, Ms Jo
Dormand, Jack	Roberts, Allan (Bootle)
Dubs, Alfred	Robertson, George
Duffy, A. E. P.	Rooker, J. W.
Dunwoody, Hon Mrs G.	Ross, Ernest (Dundee W)
Eastham, Ken	Rowlands, Ted
Evans, John (St. Helens N)	Sedgemore, Brian
Fatchett, Derek	Sheerman, Barry
Field, Frank (Birkenhead)	Sheldon, Rt Hon R.
Fields, T. (L'pool Broad Gn)	Short, Ms Clare (Ladywood)
Fisher, Mark	Short, Mrs H.(W'hampt'n NE)
Flannery, Martin	Silkin, Rt Hon J.
Foster, Derek	Skinner, Dennis
Foulkes, George	Smith, C.(Isl'ton S & F'bury)
Fraser, J. (Norwood)	Smith, Rt Hon J. (M'kl'ds E)
Freeson, Rt Hon Reginald	Soley, Clive
George, Bruce	Spearing, Nigel
Godman, Dr Norman	Strang, Gavin
Golding, John	Thomas, Dr R. (Carmarthen)
Gould, Bryan	Tinn, James
Hamilton, James (M'well N)	Wallace, James
Harrison, Rt Hon Walter	Wardell, Gareth (Gower)
Hart, Rt Hon Dame Judith	Wareing, Robert
Haynes, Frank	Welsh, Michael
Hogg, N. (C'nauld & Kilsyth)	Williams, Rt Hon A.
Holland, Stuart (Vauxhall)	Winnick, David
Hoyle, Douglas	Woodall, Alec
Hughes, Sean (Knowsley S)
Hughes, Simon (Southwark)	Tellers for the Noes:
Janner, Hon Greville	Mr. Austin Mitchell and Mr. Allen McKay.
Kennedy, Charles

Question accordingly agreed to.

Mr. Terry Davis (Birmingham, Hodge Hill)

On a point of order, Mr. Deputy Speaker. I understand that it is possible under Standing Order No. 42 for us to have a brief explanatory statement from the Financial Secretary——

Mr. Deputy Speaker

Order. Perhaps the hon. Gentleman will wait until the motion has been moved.

Mr. Terry Davis

On a point of order, Mr. Deputy Speaker. I wish to clarify the procedure for the benefit of the House before the motion is moved. I should be grateful for your ruling. Under Standing Order No. 42 it is possible for the Financial Secretary to make a brief explanatory' statement on why clauses are to be taken on the Floor of the House. We should also like to make a brief explanatory statement about why certain other clauses should be added to the motion. We should be grateful if you would allow us to do that. Will you rule that that is in order?

Mr. Deputy Speaker

The hon. Gentleman should wait until the motion is moved and then seek to catch my eye. Committal motion—Mr. John Moore.

Mr. Moore

The motion has been ——

Mr. Andrew F. Bennett

On a point of order, Mr. Deputy Speaker. I understand that we are about to move to the committal motion and that normally it is agreed as a result of discussions between the usual channels. There is no procedure for amendments to be made other than by the mover of the motion. In view of the Government's behaviour tonight, I suspect that unanimity in the House may not exist about that motion. Since under the Standing Orders it is not possible to table manuscript amendments and we must either vote for or against the motion, surely it is reasonable——

Mr. Deputy Speaker

Order. I am governed by Standing Orders, as is the rest of the House. I am not able to vary Standing Orders according to the needs of hon. Members in a particular situation. I call Mr. John Moore.

Mr. Moore

The motion has been on the Order Paper since last Friday. It could have been amended De fore this——

Several Hon. Members

rose——

Mr. Deputy Speaker

Order. Hon. Members should allow the motion to be moved and then, in accordance with Standing Order No. 42, it is up to one hon. Member to catch my eye to give good reason for opposing the motion.

Mr. Andrew F. Bennett

Further to that point of order, Mr. Deputy Speaker. I was trying to establish that once the motion is moved it is not possible to amend it. If the House defeats the motion, the whole Bill will be considered in Committee. Since the terms of the motion are normally agreed through the usual channels, would it not be for the convenience of the House, to avoid the continuance——

Mr. Deputy Speaker

Order. I have ruled on this matter and the hon. Gentleman must accept my ruling. I do not know anything about the usual channels. Mr. John Moore.

Mr. Moore

As I was saying, Mr. Deputy Speaker, the motion has been on the Order Paper since last Friday and the clauses and schedule selected for consideration——

Mr. Bennett

On a point of order——

Mr. Deputy Speaker

Order. I hope that the hon. Gentleman does not want to raise a point of order on which I have already ruled.

Mr. Bennett

I do not wish to challenge your ruling, Mr. Deputy Speaker, but I suggest that you have the power to suspend the sitting, so that the usual channels may discuss the matter. I ask you to consider suspending the sitting for discussions to see whether the House is happy that a motion which cannot be amended should be proceeded with.

Mr. Deputy Speaker

I have no intention of suspending the sitting.