HC Deb 19 March 1985 vol 75 cc801-24

Motion made, and Question proposed. That it is expedient to amend the law with respect to the National Debt and public revenue and to make further provision in connection with finance; but this Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—

  1. (a) for zero-rating or exempting any supply;
  2. (b) for refunding any amount of tax, otherwise than by a provision relating to the insolvency of a person to whom goods or services have been supplied;
  3. (c) for varying the rate of that tax otherwise than in relation to all supplies and importations; or
  4. (d) for any relief other than relief applying to goods of whatever description or services of whatever description. —[Mr. Lawson.]

Relevant documents: European Community Document No. 10277/84, Annual Economic Report 1984–85 and the Unnumbered document Annual Economic Report 1984–85 (final version as adopted by the Council).

5.7 pm

Mr. Neil Kinnock (Islwyn)

The custom is for the Chancellor of the Exchequer to be congratulated on his Budget. A Chancellor who is able to cut down on his previous year's delivery time to a new "low" of one hour 12 minutes this year deserves to be congratulated.

There are certain aspects of the Budget which can immediately be commended. First, the Chancellor has relented about the changes in capital allowances, especially on scientific equipment and short-life investment goods. It is also appropriate for the Chancellor to receive support for making life easier for the self-employed who have to retire early through ill health. Most of all, we commend the Chancellor for the changes that he has made to national insurance contributions by both employers and employees. The cheers that were heard when he announced these changes were rather louder from the Opposition than they were from the Conservative Benches. Indeed, there was what could be called a deafening silence on the Conservative Benches, probably because the Chancellor's proposals were all contained in the Labour party manifesto for the 1983 general election.

It is a shame that the Chancellor has taken so long to make these changes, despite the appeals to do so that were made well before the last general election; appeals which have been repeated by me and by my right hon. Friends since then. Who knows how many jobs might have been saved if successive Chancellors had taken the opportunity to reduce the national insurance contributions, especially since this Government raised them by 50 per cent. after they took office in 1979.

There is much that is deserving of detailed attention and comment in this Budget, and I have no doubt that many of my right hon. and hon. Friends will want to do that. It is not the custom of the House that, in the speech immediately following the Chancellor, I should go into what could be called the nitty-gritty.

The Secretary of State for Trade and Industry (Mr. Norman Tebbit)

Just as well for the right hon. Gentleman.

Mr. Kinnock

That was the nitty-gritty speaking. There is no one nittier and grittier than the Secretary of State for Trade and Industry.

The Chancellor deserves the courtesies that go with clearly having spent considerable time and energy on making his Budget and compiling his speech. The right hon. Gentleman has clearly put a lot of work into the Budget. The problem is that it is highly unlikely that a lot of work will come out of the Budget.

The Chancellor's advertisers, and, indeed, the Chancellor himself today, have repeatedly used the phrase "a Budget for jobs." Indeed, we have heard something even stronger. We heard the Chancellor referring to the scourge of unemployment and the evil of unemployment. Let us hope that that is a harbinger for much bigger actions in future to deal effectively with unemployment.

We have heard all about Budgets for jobs before. We heard it last year. In one of the dying phrases of his speech last year the Chancellor talked about the Budget for jobs, and in the succeeding year unemployment in Britain increased by 143,000. That has been the case in each of the other six Budgets for jobs that have come from the Chancellor and his precedessor. All that we have seen after each of those Budgets for jobs has been a remorseless increase in unemployment from 1.25 million to the now registered 3.25 million, but actual 4 million unemployed in Britain.

On that basis, sadly, the Budget will fail Britain again. Unemployment in Britain is higher now than ever before, and it has stayed higher for longer than ever before. It is more worrying to more people, both the employed and the unemployed, than it has ever been before. It is more financially and socially expensive and wasteful than it has ever been before. Action to fight unemployment is more necessary than it ever has been before.

I know that Conservative Members are not too keen on listening to the unemployed—at least, not to all of them —but perhaps those who are keen on listening to the unemployed, on trying to relate to them and on campaigning on their behalf, can prevail upon their colleagues to ensure that we get that action which is more necessary than ever before. Unfortunately, little that the Chancellor said this afternoon properly recognises or responds to the unemployment which is higher, has lasted longer and is more worrying than ever before.

We have heard the propositions that relate to the youth training scheme, to the community programme and to an expansion—although we did not hear exactly how much —of in-service teacher training. Let me say this about the YTS proposals, as far as we could distinguish them. The right hon. Gentleman talked about unemployment not being an option. That sounds like an encouraging phrase, but from the lips of the Government it is an ominous phrase, especially since we heard of the net costs of the scheme. Therefore, we are forced to conclude that there is a strong likelihood that the Government will withdraw benefit entitlement from young unemployed people who do not find themselves suited by training schemes or who cannot get work or education, and who therefore want to use unemployment benefit for the purpose for which it was originally paid at the beginning of the century—to look for work.

Are the Government proposing—I shall gladly give way to have my question answered — to withdraw entitlement to benefit from unemployed young people? If they are, it will be a repeat of a tragic part of our history.

My father went to a training camp for training in the 1930s. The penalty for not doing so was withdrawal of his dole. It may be that, 50 years later, the youngsters of our generation are being offered exactly the same—absence of options, reduction of freedom—as a consequence of not wanting to undertake the form of forced training which the Government will be operating. Are we to have a conscriptive scheme? Are we to have a coercive scheme? Or are young people to retain their entitlement to benefit if they want to look for jobs, as well as getting any advantages that go with the expansion of the youth training scheme? The whole country and every youngster in it will want to know the answer to that question.

The Chancellor of the Exchequer (Mr. Nigel Lawson)

Had I any new proposals to make on that front, they would have been contained in my speech.

Mr. Kinnock

We are now looking for an undertaking from the Government, and we shall press this continually, that, having not made or proposed any such changes today —if that is what the Chancellor means—no changes will forbid the payment of benefit to unemployed youngsters. That would be an elementary injustice and the young people of Britain would not tolerate it. They want jobs, education and training. They do not want to take those under coercion, and the Chancellor and other Ministers had better get hold of that.

We have heard about the Government's policy on wages councils. That is about the most squalid of all the Government's policies on the labour market. We are being told that the real inhibition to the development of our economy is the £1.19 an hour that is offered by the hairdressing wages council, or the £1.70 an hour that is guaranteed by the catering wages council. If they were enforced there might be something more to be said, but last year inspectors made 10,000 notifications that employers had broken the regulations of the wages councils, and two prosecutions arose out of them. If the right hon. Gentleman is concerned about personal freedom, good labour markets and decent employer-employee relations he should be getting those inspectors to enforce the law as it has stood since 1919 and as it has been upheld by successive Tory and Labour Governments.

What the country really needed today from the Budget was expansion, opportunity, justice, enterprise, and, most of all, jobs. This stagnant Chancellor has, in the face of all those requirements, simply given us a stalemate Budget which gives with one hand and takes away with the other, and which even threatens to jeopardise freedoms which have been narrowed over recent years.

The Chancellor has today again turned his back on millions of our fellow citizens who are unemployed and millions who are poor. He has turned his back and waddled away from them, and he will not be forgiven for doing that. He has only just started to wake up to the fact that the assistance necessary to sponsor growth in this economy is a direct obligation of Government.

Nobody claims that recovery can come only from Governments. Nobody claims that Governments must bear the full responsibility. But modern Governments can and must create the conditions in which what the Chancellor called the evil or scourge of unemployment can be fought effectively and vanquished by the Government and those prepared to assist them.

The fact is that there is no need for the Chancellor to insist on maintaining the course, as he put it. There are real and realistic alternatives. Those real and realistic alternatives have been put to him by the CBI, the road hauliers, the construction industry, the TUC, the National Economic Development Council and by a great chunk of the Conservative party in the House and throughout the country. They were put to him long before others by the Opposition.

The very least that the Chancellor could have done today was to announce that he was prepared to provide an additional £3,500 million for investment and repair in housing, roads, sewerage systems, gas and electricity supply industries, training and research and development. He could have done that. He was prepared to find £2.5 billion to fight the miners. Why is he not prepared to do it to fight unemployment? That would show a real sense of priority on the part of the Government, and the jobs generated in those spheres as they have been listed by us and by others would be real jobs, not make-work schemes, not cosmetic covers for the unemployment figures. They would all be true contributions to the efficiency, safety and fairness of our society and our economy.

The cost of not undertaking that major task of repair and development will only get higher as time goes on. The bills will only be bigger if that action is neglected now. The Prime Minister is fond of telling us that we must not maintain borrowing because we do not want to leave a debt to our children. It is very strange that the right hon. Lady is prepared to leave them a legacy of decay and danger because the Government will not undertake the proper expenditure now. Somehow she does not care that, by not spending, she and her Government are not only creating problems now but are creating despair for our children, about whom I know she cares. That is what the Government are doing by showing their willingness to borrow to maintain unemployment instead of borrowing to undertake new investment and provide new employment.

When employers, industrialists, analysts, councillors, the Opposition parties and the Conservative party in substantial and increasing measure tell the Chancellor of the Exchequer that he is wrong, what makes him think that he knows best? It cannot be his record, can it?

The Chancellor of the Exchequer is the parent of the medium-term financial strategy, the great design that was supposed to set and to keep "financial discipline"—as the right hon. Gentleman likes to put it — in the economy. Since they introduced that strategy in the 1980 Budget, the Government have destroyed 1.25 million more jobs than even they planned to destroy. In that process they have spent 10 per cent. more money than they intended to spend. They have printed 20 per cent. more money than they planned to print. They have borrowed £20,000 million more than under that medium-term financial strategy they planned to borrow.

The Chancellor's brainchild of a strategy was intended to bring "a significant reduction," as the document put it, in interest rates. Instead, real interest rates have been at record levels for record periods of time and, in periods of that time, have been 50 per cent. higher than they were under the previous Labour Government.

The right hon. Gentleman is the first Chancellor to have presided throughout his whole term of office over a manufactured trade deficit. He has presided over a bigger fall in the value of the pound than any other Chancellor in British history. He is the man who thinks that we have a recovery when we have 4 million unemployed. He is the man who thinks that in this technological revolution Britain can depend on jobs which, as he has previously put it, are not so much low tech as no tech".

He is the man who told the House last July that the expenditure on the miners' dispute—2.5 billion—was a "worthwhile investment for Britain". This is the man who will not recognise that the ruinous cost of maintaining unemployment in Britain is the greatest single factor blocking even his desire, his plans, for durable growth, stability and confidence in our country. He has got himself into the position where even his own plans for tax reform and tax cuts are sabotaged by his own policies of higher unemployment.

This is the man who told us on Sunday, in his interview with Mr. Harris in The Observer, that financial discipline is necessary because it is exactly the same with a country as it is for any housewife".

Would any housewife leave holes in the roof for want of some borrowing in order to undertake repairs? Would any housewife deliberately keep her grown-up children at home out of work rather than help them to get a job in the future? Would any housewife give money to a rich uncle rather than give anything that she had to spare to poor parents? Housewives would not do that, but that is exactly what the Government do.

All those distorted priorities, all that neglect of unemployment, all those wasted resources, all the meanness towards the poor and the old, are features of this Government. That is their "financial discipline", and it would not be the financial discipline of any ordinary housewife in the land. The result of those policies is that there are more poor people living in deeper poverty in our country now than for decades past, and the Chancellor has done nothing truly effective to help them today.

The higher tax thresholds and the pension and benefit increases which can be anticipated this year will not even keep those who depend upon those incomes at the levels at which they are now, because the Government's policy of increasing water, gas and electricity charges rents, rates, transport fares and prescription charges and the petrol rises will eradicate in short order any benefit that comes from those increases. Indeed, today, a week after we heard of the £2 prescription, we have the £2 gallon of petrol, and everybody knows exactly what the knock-on effect of that will be.

This country needed a Budget for jobs and for justice. Britain needed a Budget for investment and for modernisation, a Budget which would help people to help themselves. That is the Budget which the Opposition would offer now and which people throughout this country want, because they recognise that it is a vital obligation of the Government to sponsor recovery.

The Chancellor has responded to the deeply felt needs of the country by more of the policies that have already brought idleness and injustice on a massive scale. This Budget will not give scope for improvement, and it will not arrest or reverse the decline or decay in our economy and our society. It is not a Budget for healing divisions, for householders, for business, for giving security to the old, or for giving real opportunity and support to the young. Indeed, it is not even a Budget which could reasonably be expected, if there were any serious competition from within the Government, to save the career of the Chancellor of the Exchequer.

The right hon. Gentleman has told us that he has battened down the hatches and is staying on course. He is not on course. He is travelling in circles and sinking all the time. In this coming year we want the people of conscience and courage who exist on the other side of the House to join us to stop the right hon. Gentleman dragging our country down with him.

5.28 pm
Mr. David Knox (Staffordshire, Moorlands)

I should like to congratulate my right hon. Friend the Chancellor on his presentation. I have heard more exciting Budget speeches, but I certainly have not heard a briefer one. I regard both those remarks as complimentary because, in common with many people, particularly outside the House, I am getting a bit tired of excitement from Chancellors of the Exchequer. All such excitement does is to cause confusion and extra work and undermine the activities of people who are trying to run business and commerce in this country.

I commend my right hon. Friend on his brevity, too. In the past, I have listened to some very long and boring Budget speeches, and I prefer the shorter version.

I must confess that there were rather more items in the Budget which I found myself able to welcome than I had anticipated. I welcome very stongly the substantial increases in the thresholds for income tax, particularly for those at the bottom end. That is a welcome element of social justice.

I welcome also the changes in the employer's national insurance contribution. It will be fairer than the existing system; and fairness, or an appearance of fairness, is most important. The excise duty increases this year are tolerable, and, as one who enjoys a glass of whisky, I find the increased duty on a bottle of whisky almost reasonable. I am pleased, too, that the VAT threshold has been increased, though my right hon. Friend might have increased it by somewhat more than he has.

I am sure that all hon. Members join me in welcoming the fact that there is to be no change in the tax treatment of pension funds. It is unfortunate, however, that the Chancellor did not make this apparent some time ago. Much concern was caused to people by speculation about what might happen to pension funds. Among them were many who were looking forward to retirement and who were wondering what they would receive and whether it would be as much as they had anticipated.

Firms were also concerned because they anticipated that they might have to introduce pension fund changes which would result in increased costs to them. Thus, although I welcome the fact that there is to be no change, it is unfortunate that that was not made clear earlier.

I welcome the fact that there is to be no VAT on books, newspapers, journals, children's shoes and children's clothes—all items about which we heard much in recent weeks. I have no great objection to VAT being levied on newspaper advertising, because that would merely bring it into line with other forms of advertising.

I welcome the promised Green Paper on the reform of income tax. I hope that it will lead to a measure of integration between income tax and benefits. That has been needed for a long time, and I hope that we shall start more positively on that road as a result of the publication of the Green Paper.

I come to some of the wider issues of economic policy which arise from the Budget. The principal economic problem facing Britain today is unemployment, and on its effects on unemployment the Budget will ultimately be judged, and rightly so. The Chancellor claims that it is a Budget for jobs. I hope that I shall be proved wrong, but I fear that it falls short of what is required to make a real impact on unemployment. I say that, first, because the Chancellor did not give details of any plans to try to stabilise the international monetary situation, and, secondly, because he has done nothing to increase substantially the level of domestic demand.

In the first 25 years after the war we had relative stability in exchange rates under the terms of the Bretton Woods agreement. There was, therefore, a stable international economic order under which countries, co-operating with one another, could rebuild, develop and expand their economies. That provided Britain with the conditions which made it possible to operate the economy more efficiently and effectively than at any time in our history.

In the early 1970s, through no fault of ours, Bretton Woods broke down. Unfortunately, it is not possible to recreate it. However, the most important action that the Government should be taking today is to work with our friends, particularly in the European Community, to create a greater measure of economic stability in the world, for there is no chance of permanent economic recovery so long as the present economic chaos remains.

The fact that the pound is worth about half what it was worth against the American dollar four years ago and that its value has declined by about a third in the last 18 months, with all the disruption to our domestic economy that that has caused, is evidence of the urgent need for action to reduce fluctuations in exchange rates. Continual changes in the value of sterling are more damaging to our economy than high or low exchange rates, damaging though the latter can be.

Immediate unilateral action which Britain could take, which would have beneficial results, is to join the exchange rate mechanism of the European monetary system. That would provide us with a degree of stability for 60 per cent. of our trade. It would be a step forward which would make it easier for the countries of the European Community to speak with one voice in international economic affairs and to take initiatives towards the reintroduction of greater international economic stability, particularly in terms of initiatives with the United States and Japan.

We shall of course, be told that the time is not right for Britain to join the exchange rate mechanism of the EMS and that membership would restrict our freedom of manoeuvre. The absurdity of that argument is shown only too clearly when one asks, "What freedon of manoeuvre?"; because there is none and there has been none for some time.

Even though nothing has been said about that today, I hope that there will be an early announcement that Britain is to join the exchange rate mechanism of the EMS and that then, with our friends in the Community, we shall use the consequent international economic muscle to try to bring about a greater measure of economic stability in the world. That would benefit the economies of every nation. That is important for Britain because, without it, our domestic economy will inevitably remain weak and unemployment will remain at an unacceptable level.

An improvement in the world economy, though an essential prerequisite to strengthening the British economy, will not cure our economic problems or of itself bring back full employment. It will require a substantial increase in the level of demand in the British domestic economy to take up the slack and bring people back into employment.

It is nonsense to suggest that insufficiency of demand is not one of the main causes of unemployment. Usually that is argued on the basis of anecdotal evidence of some prosperous people and rising consumer sales. If demand were increased and the unemployed brought back into employment, more people would become prosperous, the already prosperous would become more prosperous and consumer spending would be even higher, quite simply because there would be more to share around.

Demand will not rise automatically. Only the Government can make it rise other than marginally. It can be done by reducing taxation while not decreasing public expenditure or by increasing public expenditure while not increasing taxation, or by a mixture of the two. In other words, the Government can increase demand by increasing the public sector borrowing requirement. There is plenty of slack in the economy today in terms of unused or under-utilised capital and labour to enable that to happen without any inflationary danger.

Only adherence to the now discredited theories of monetarism and to the medium-term financial strategy has prevented the Chancellor from increasing the PSBR today. He should have cut taxes by more than he proposes or, preferably, in present circumstances, announced a substantial programme of public investment in the infrastructure. That is desperately needed and it would have been of great benefit to the hard-hit construction industry and those who work in it.

The effects of the tax cuts that the Chancellor announced are peanuts compared with the measures that should have been taken to enable us to return once again to full employment. It is no good thinking that tax incentives for businesses, schemes to encourage the establishment of new small businesses or other measures to improve the supply side—however admirable these may be in themselves and however useful they may be in the long term — will have any effect on the overall employment level in the absence of an increase in demand. Those measures will only attract jobs to particular areas, types of production or types of firm at the expense of jobs elsewhere. Jobs exist only when there is a demand for what is produced. Without that demand, there are no jobs. Without increased total effective demand in the economy as a whole, there cannot be significantly more jobs in the economy as a whole, and unemployment will remain at its present unacceptably high level.

The same is true of tax incentives to individuals. There is no evidence that the tax incentives introduced in the 1979 Budget have had any effect on unemployment, although they might have had a beneficial effect if they had been accommpanied by an increase in total effective demand. The changes announced by my right hon. Friend concerning the community programme and training are, of course, welcome, but they do not involve the creation of real jobs. The numbers involved will be small and there will be a marginal improvement in the unemployed statistics, but not much more than that.

If we really want to bring the vast army of the unemployed back to work, we must aim to increase the rate of economic growth. The Chancellor's projected rate of growth for the coming year is just over 3 per cent. which, if achieved, will have no impact on unemployment, which will continue at about its present level. A real Budget for jobs would have aimed at a growth rate of 6 or 7 per cent. which, given the degree of slack in the economy, would have been sustainable for many years. That would have involved a substantial increase in the public sector borrowing requirement which would have been manageable because of our present volume of savings. I regret the fact that that has not been done. I am afraid that the Chancellor's Budget judgment leaves much to be desired.

5.42 pm
Mr. Gregor MacKenzie (Glasgow, Rutherglen)

Over the years, you and I, Mr. Deputy Speaker, have heard a number of Budget speeches. This one had the merit of being short in length, but it was also rather short on ideas. This Budget had been much heralded as a Budget for jobs. Like the hon. Member for Staffordshire, Moorlands (Mr. Knox) I worry about that aspect. If this was a Budget for jobs, goodness knows what it would have been like if it had been a Budget for something else. It strikes me that the Chancellor has not got to the core of the issue that worries every one of us—unemployment.

Sometimes Chancellors forget that government is about people. Sometimes they forget that Budgets are about people and that, these days, people are more concerned about their jobs and the jobs of their children than about any other aspect of life. They are concerned that their young people should have jobs. For all this talk about YTS and so on, people want their families to have real jobs which are created by industry with the assistance of the Government. There is no point in giving a young person some sort of training for a couple of years only to throw that young person onto the scrap heap at the end of the period. Unemployment should loom much larger in the Chancellor's mind than it did in his speech today.

The Chancellor seems to forget totally the social evils brought about by unemployment. Frequently we listen to the Prime Minister moralising about the values of family life. Nothing disrupts family life more than unemployment. The Prime Minister often moralises about all sorts of other social evils, but I believe that disillusionment, especially among young people, about unemployment is leading to hooliganism, vandalism, glue sniffing, drug taking and what we have seen during the last few weeks —which I think is now called "Millwallism". They are the work of unemployed young people. The hon. Member for Moorlands, as a Scot, knows as well as I do: For Satan finds some mischief still For idle hands to do. Chancellors sometimes forget that that is a social problem. Above all, the skills and talents of hundreds of young people are being wasted. Those skills and talents could be used to create wealth.

A number of us are worried about unemployment. Any Government who do not make reducing unemployment their first priority are failing in their duty to this generation and future generations. That is not just my view. Only the other day, a poll conducted in Scotland investigated people's priorities. The poll showed that two out of three people said that they would much rather the Chancellor used the nation's resources to create jobs than to cut various taxes.

Tax cuts may be welcome to some, but the Chancellor deludes himself if he believes that people dash off to invest in industry the few pounds' benefit they receive from tax cuts. All too often, instead of being invested in industry by the individual saver and investor, that money is spent on holidays abroad or on a BMW instead of a British-made car.

I shall cite the number of unemployed people in my constituency, and I hope hon. Members will forgive me for making a parochial point. Tax cuts would be of no interest to the 7,332 people unemployed in my constituency. About 2,946 of them have been unemployed for more than six months, another 2,154 for more than a year and 1,360 for more than two years. About 400,000 people are unemployed in Scotland and nearly 4 million are unemployed in the United Kingdom as a whole.

Recently, the Prime Minister told me in answer to a question that £1.497 billion was spent on unemployment benefit. That figure does not include the people who are taken off employment benefit after a year or those on supplementary benefit. That is a dreadful waste of the country's money.

We talk about the benefits from North sea oil. The Prime Minister has told me that our revenue from North sea oil is about £8.8 billion and that 17 per cent. of that money is spent on unemployment benefit alone instead of to create jobs. We are paying people to kick their heels. I believe that during the next few months we should give more thought to that aspect.

The hon. Member for Moorlands stressed, as did the TUC and dozens of other organisations, that to improve the economy we must first improve the infrastructure. The Government have a serious obligation to improve our road system, our rail system and all other forms of public works. That would be of tremendous advantage in helping to reduce unemployment. I am a bit simple about such matters, but it strikes me as exceedingly odd that, at a time when in Scotland we need houses and houses are crying out for modernisation and repairs, hundreds of people in the construction industry should be on the unemployment list. That is beyond my comprehension and, I am sure, beyond the comprehension of everyone.

Ministers constantly tell us, and I accept it, that if we do not do more for industry and if it does not become more competitive, we shall fall behind in the international race. Recently, I read that we were one of the most inventive countries in the world. More inventions are patented here than anywhere else in Europe. Sadly, because of a lack of resources and because the Government are not prepared to provide assistance new inventions are developed and manufactured abroad.

The Government's whole approach to industry worries every one of us. A clue to that is that the Government do not think hard enough about industrial problems. A few years ago I heard a Conservative Member—I dare not mention him by name as he is a young man for whom I have considerable regard, and it would not do his prospects in the Tory party any good—say that he wished that Treasury Ministers knew more about industry than they did about money. I wonder whether he has changed his mind, because I heard last week that New York hotels were paying tourists 98 cents for a pound. That does not strike me as a blessing bestowed by Treasury Ministers. If they knew what they were doing, they would ensure that our revenue from the North sea—instead of 17 per cent. of it being spent on unemployment benefits and so frittered away — would be spent on research, development, training and investment in the modernisation of our older industries, as my right hon. Friend the Member for Islwyn (Mr. Kinnock) has just said.

I should like the Government to spend more money on an effective regional aid programme. I cannot accept what the Prime Minister said at Question Time, when she claimed that we were not two nations. If the Prime Minister and her Ministers really visited the towns they would discover that there is a north-south divide. That is the sort of situation that the Labour party certainly wishes to end. The measures that I have outlined are the only way to create the jobs, and so the wealth, which the country sadly needs.

Finally, for the past six years we have been told that we must be patient. Some of us are beginning to lose our patience. It is all very well for the Chancellor of the Exchequer to say that he now has inflation at only 4 or 5 per cent., but the cost of that is high unemployment. I do not believe that things are getting much better, and will never believe that they will get better until the Government have a change of heart and a change of policy. Nor will the millions who are unemployed in this country.

5.54 pm
Dr. Alan Glyn (Windsor and Maidenhead)

I have a great deal in common with the right hon. Member for Glasgow, Rutherglen (Mr. MacKenzie). First, we have both heard Budget speeches from many Chancellors of the Exchequer. Today's Budget certainly had the virtue of being short and simple. I understand what the right hon. Gentleman said about unemployment, as, I am sure, does the Chancellor of the Exchequer. However, it is not easy to say how much money is spent on unemployment benefit and how much of it could be transferred to benefits in employment. I do not understand and never have understood that equation. Even successive Chancellors have been unable to carry out that equation. An attempt was made by a Government to inject money into the economy and to create jobs, but it failed. I wish that an easy solution could be found for what the right hon. Gentleman correctly described as one of the greatest social evils of our time.

The right hon. Gentleman talked about two nations. We all know from personal experience of people who have come from the north to the south for jobs, and of their incredible frustration when they find that they cannot be housed or bring their families with them. I join the right hon. Gentleman and the House in a desire, not only to make the north and south one, but to create as many jobs in the north as are available in the south where, incidentally, employers are waiting to take up people to fill vacancies.

The Budget must be considered as a whole, in terms of what it will do in future and in terms of what it does as a platform on which we can build. In the long term, it lays the foundations for the growth and creation of new jobs. It does not prop up old industries, which we have been inclined to do rather than to create new industries in line with modern demand. That is a legacy which it will be extremely difficult to overcome.

Unemployment is one of the terrible hurdles that we must overcome, and if we are patient, I am sure that we shall do so. I agree with the right hon. Gentleman that the creation of 400,000 jobs will not solve the unemployment problem. It will be a long time before the transition of our industries to modern technology will overcome that enormous problem.

A main point of the Budget is to create the right atmosphere for a property-owning democracy, for houses and for share-owners. I know that the hon. Member for Rochdale (Mr. Smith) agrees with share owning and share participation by workers in industry. It is important to emphasise what the Chancellor said about maintaining control of public expenditure and, more important, control of inflation, because our entire policy is based on that. The rate of inflation was 18 or 20 per cent. some years ago. It is now about 5 per cent., and the Chancellor must take the credit for that.

With regard to income tax, the Chancellor has placed the emphasis in the right place—that is, on the lower paid and on taking people out of the tax bracket altogether. He has also placed emphasis on small businesses and the help that he can give them. I shall not go into detail, because the Chancellor spelt it out well himself. However, he did not quite bring home the fact that small businesses are hampered not only by the tax system and the number of forms and complications with which they are faced. A one-man business must fill out heaven knows how many forms to complete his tax return. In many cases the forms have no value whatsoever—half of them are duplicated and the other half are consigned to the dustbin. They do not give a small business man the opportunity that he requires. Small business men are being given incentives. We depend on them, because a small business develops into a large business. That is how our whole economy has developed over the years.

I should like to refer to taxation. In the Budget the Chancellor has given us what I have always wanted to see — a move from direct to indirect taxation. Direct taxation is an uneconomic form of tax because it takes a long time to collect and is a laborious process, whereas indirect taxation is far simpler. I welcome the reduction in the threshold, which is very important, and I also pay tribute to my right hon. Friend for being able to add to our reserves.

My right hon. Friend touched on the problem of school leavers. We all know the tragedy. We hope that the scheme that he put forward will enable them to have at least two years' training, but the training that they receive must be in line with technological advances which this country and the whole world see. It is no good putting people into something which is not designed or oriented for the future. It is towards achieving that objective that the Government must put their entire resources and brains.

I was interested in what my hon. Friend the Member for Staffordshire, Moorlands (Mr. Knox) said about pension scares. We heard about all the scares on television, such as taxes on pensions and books. I do not mind the tax on advertisements, which is reasonable. All of us on both sides of the House have suffered from such scares. I believe that my right hon. Friend the Chancellor went a little further than he should have done when he said that there would be no retrospective legislation. He could not deny those scares and say what he would do in the Budget. I understand that that would be unconstitutional. Nevertheless, we still have such scares, and I am glad that these ones have now been removed.

We want to see the reform and restructuring of industry. We want new industries to be created and small businesses to be encouraged. Above all, we want the tax system to be simplified and reformed to make it easier to collect and beneficial to all concerned. Let us look forward in this platform Budget to seeing this country recover and businesses grow, accompanied by an increase in our standard of living. Let us hope that there will also be a reduction in unemployment, which is the tragedy of the nation.

6.4 pm

Mr. Cyril Smith (Rochdale)

If I count proper Budgets as opposed to mini-Budgets, I think that this is the 13th budget that I have heard presented in the House. The title that has been given to it is the worst use of the English language that I have heard during all the Budgets that I have listened to. To describe it as a "Budget for jobs" is the greatest joke that I have heard for many a long year. If one examines this "Budget for jobs", what is the Chancellor's solution to the unemployment problem? He said that he was dealing with job creation and, in effect, that he would make it easier for employers to sack people. He said that people would have to work for two years instead of one year before they were entitled to protection from unfair dismissal. Therefore, the first measure that he has introduced to protect jobs makes it easier to sack people.

Secondly, the right hon. Gentleman proposed the abolition of the wages councils. I speak as one of those who are revered by the Government— I have a small business, and I employ 38 people. I must tell the Government, as an employer, that I do not want the wages councils to be abolished, because they protect my business from unfair competition. They ensure that my competitors are required by law to pay the same minimum wage as I do. However, if the wages councils are abolished, the cowboy employers will be able to employ people at ridiculously low wages for about six months, pinch other people's customers and trade, and then disappear. Other people's businesses will decline because they do not have the custom. Therefore, anyone who imagines that wages councils are the enemies of employers, especially small businesses, lives in cloud-cuckoo-land. The abolition of the wages councils will not lead to more jobs. Ultimately, it may lead to fewer jobs because it could mean good businesses going to the wall as a consequence of short-term cowboy activities.

The Chancellor then said that only businesses could create jobs. That is not true if by "businesses" he means private enterprise. Many businesses rely totally on Government finance to purchase goods. There are many examples, such as local authorities purchasing houses and hospital goods. In my part of the country, the water and sewerage systems are desperately in need of renewal. Scores of millions of pounds need to be spent on them. The purchaser is the water authority. If it relies on being financed directly by the water consumer, there is not sufficient capital for the required renewal. The alternative is to inject Government capital so that the Government can purchase capital goods and thereby create jobs.

Therefore, the Chancellor's statement that only businesses can create jobs is not true—if, as I suspect, the right hon. Gentleman means that only private enterprise can create jobs. It is on the section concerning the creation of jobs that I believe the Budget will be judged, in the long term, to have been a failure. Certainly, a £7 million public sector borrowing requirement is too low in the present situation. The Chancellor added that it takes a long time for policies to work and create jobs. He can say that again. The Government have been saying that since 1979. We are now in 1985—I do not know what constitutes a long time in the Government's eyes, hut it must be longer than six years.

There are things in the Budget that one welcomes. It would be a funny Budget if there were not things to welcome. I welcome the extension of the youth training scheme to two years for 16-year-olds, but it is a great tragedy that it is not two years for 17-year-olds as well. We should interpret the word "training" literally and not have tarted-up jobs that are just excuses and palliatives for taking people off the dole. Whether a youngster is 16 or 17 when he goes into the scheme, two years are still required to train him. The figure should not be reduced to one year simply because the youngster is 17. The Government's concept of youth training, demonstrated this afternoon on the basis of two years for one age group and one year for another, shows that they see the YTS not as training but as an excuse for taking people off the dole. If that is the basis of the YTS, it will not do the job that it was meant to do.

I make the following remarks with some irony. The Chancellor said that he would spend about £40 million on creating places for training in engineering. That will come good in the north-west of England and areas serviced by Salford university, a university that created engineering places. Three or four years ago the same Government destroyed hundreds of places at that university, which specialised in engineering. If that represents a U-turn in the Government's programme, it is to be welcomed. It is nonsense for a Government who have destroyed thousands of places in engineering training at universities, polytechnics and so on, to sit there and say that they have created more training places.

I am delighted that the Chancellor had enough sense to leave pensions alone. I suspect it was political sense that moved him, never mind what he said about speculation. I believe that speculation was fuelled so that the Chancellor could see what the reaction would be. When he saw the reaction, especially from his own supporters and Back Benchers, he realised that he would have to back-pedal fast.

I welcome the encouragement to small businesses and the self-employed, but more help could have been engineered for investment for small businesses. There are such things as direct grants, but if the Chancellor cannot provide them he could provide help for small firms through interest-free loans for investment in productive machinery, in tools, in tool making and in modern technology. If those are not possible, the Chancellor might persuade the banks, which get a rake-off every time bank rates rise, to provide two rates of interest on bank loans: one for those investing in productive machinery and another for those who simply want to borrow money for purposes that may in their interests be legitimate but which make no overall contribution to the economy or to industry.

The Chancellor's announcement that the tax on derv is to be increased by 3½p per gallon is serious. During the last six months, the price of a gallon of derv has been increased by 31p. Small hauliers are becoming extremely worried about the constant increase in the price. In the coming weeks the Government will hear more and more about the serious impact this will have upon small haulage contractors. Far from helping to create jobs, it may well destroy them.

Let it be clear that transport is a basic cost of industry. If transport costs to the producer increase, he can only pass them on to the person buying the goods. I am not criticising the increase in the price of petrol, but I certainly criticise the increase in the price of derv. When pressure mounts on the Government, as it will, from the Road Haulage Association, the Government may be persuaded to think again.

Any reduction in tax, whether direct or indirect taxation, is always welcome, but, as the hon. Member for Windsor and Maidenhead (Dr. Glyn) said, we are merely shifting from direct taxation to indirect taxation. In this context, indirect taxation is not merely putting a little on VAT. Let us remember the increases that have been approved even in the past few weeks. The Leader of the Opposition outlined them. The cost of gas and electricity is being increased to give more revenue to the Government and for no other purpose. The industries themselves see no reason to raise their charges, but the Government insist that they be raised. Whatever people save in taxation, they will have to pay in extra charges for gas and electricity.

There is also the increase in prescription charges. That is not just an increase from £1.60 to £2; there are also the items which are being removed from the list and which people will have to pay for in full. Then there are the increases in council house rents, in transport charges and in rates. In many cases, the rate increases have been forced on councils not because the local authorities concerned have increased expenditure by more than the rate of inflation but simply because of the Government's rate-capping policy. The average taxpayer and the average ratepayer have to bear all those increases.

When the Chancellor told us that he was reducing taxation, the national insurance surcharge or whatever, it sounded very good. It is good, taken in isolation, but if it is taken as part of the whole package it is not half so rosy. The reductions in taxation must be seen against the increases in charges for necessary services.

This Budget is like every other Budget—a curate's egg. It is good in parts, but taken as a whole it is far worse than it appears at first sight. Certainly it has been misnamed if it is being called a Budget for jobs. Any effect it has on unemployment will be minimal. As the Leader of the Opposition said, it is a stalemate budget. The country needs a new attitude to unemployment. This Budget does not display it.

6.15 pm
Mr. John Stokes (Halesowen and Stourbridge)

Unlike the hon. Member for Rochdale, (Mr. Smith), I should like to congratulate my right hon. Friend on the felicity of his presentation of the Budget and on his courage and brilliance. The Budget was awaited this year with more than the usual speculation. Most of us received scores of letters from constituents about what it might or might not contain. Perhaps the nation expects too much of the Budget, because, after all, the salvation of the country depends ultimately upon ourselves as individuals. All that the Government can do is to set the scene to allow us to get on with the job. Therefore, anything that the Chancellor can do to set us free from the shackles of state control is to be welcomed.

This nation, which is so superb and united in war, is not always so good in times of peace and is sometimes inclined even to be divided against itself. In recent years we have certainly become a very difficult country to govern. The present Government, under the dynamic leadership of my right hon. Friend the Prime Minister, are trying to get us all to embrace capitalism more fervently and to allow the market to work more freely, as it does in the United States, where everyone believes in free enterprise and where there is no Socialist party.

We also need more of the nationalism that one finds in some countries on the continent, particularly in France, among all political parties and throughout business. We need to be dragged into the last quarter of the 20th century to compete against the dynamic capitalists of the United States of America, Japan, Germany, France, Taiwan, Korea and so on. We have the brains and trading skills. What we need is the dedication which is so evident in most of our foreign trade rivals. Our business men should be the best men in the country.

I judge the Budget, therefore, against the requirements of that background. In that sense it has been successful. Of course, a great deal more remains to be done. We give such colossal subsidies to so many special interests—farmers, industrialists, students, householders, savers—that it is no wonder that taxation is still so high. Of course, those subsidies cannot be reduced in one year. The reduction must be gradual and there must be the fullest explanation; far more than the Government are sometimes inclined to give us, hence the revolts against the Government by some middle-class supporters. Our working-class supporters are tougher and more loyal. They understand in a fundamental way what the Government are trying to do.

I wanted the Budget to make it easier and cheaper for people to be taken on for work, and some good steps have been taken in that direction. I wanted substantial improvements in the tax lot of the lower paid, who, owing to our idiotic benefit system, are often little better off in work than when receiving state benefits. The Chancellor has gone some way towards doing that. It is probably the most important action that he has taken in the Budget. I should have liked to see stamp duty on house purchase removed to make the redeployment of labour easier. I welcome the reductions in the national insurance contribution from employers and employees. That is most important.

I am sure that my right hon. Friend would have liked to do more, but his room for manoeuvre is strictly limited. He must now guard sterling and be seen to be guarding it. He must keep a tight hold on inflation. He must long, as we all do, for interest rates to come down. That is necessary for industry and commerce, but, alas, the time for that has not yet come. However, there are many good signs. Exports seem to be growing even faster, oil imports will diminish with the ending of the miners' strike, and the contribution of the new and growing service industries is an encouraging sign, although manufacturing recovery is slower than many of us would have wished. My right hon.

Friend has made a most sensible judgment about the size of the borrowing requirement—neither too much nor too little.

Apart from the overall picture of the British economy, which is our main consideration in the Budget, I must also think of the position of my constituency in the west midlands. All hon. Members know that the recession there has been deep. I detect at last some signs of recovery, but it has been slow. The Budget will surely help the west midlands. My constituents are a sturdy lot and seldom complain. The Budget should help industry and employment there, but my constituents know that above all they must help themselves. That means that they must find new technologies, new products, new markets and cheaper ways of making things. The emphasis which for so long in the black country has been on production must now be on marketing and sales.

I listened carefully to the new taxes on those who have company cars. I hope that the tax on the cars used by sales managers and salesmen will not be increased, because they are essential tools of that trade.

We have no frills in the west midlands, and we dislike extravagance. I wish, therefore, that in the Budget we had heard of the demise of more quangos. Has the attempt to curb quangos stopped, or only been postponed?

I welcome the emphasis given in the Budget to training. It is a vital aspect in which this country must catch up with its competitors. I also welcome the further help given to small business and the self-employed. The income tax changes are excellent. They could have been much more had it not been for the cost of the miners' strike; yet, costly as that strike was, it had to be won. We must all now hope for a much better climate of management-union relations in the coal industry and throughout industry.

I believe that there is much more realism on the shop floor about the position in which this country finds itself. In all, I believe that my right hon. Friend has done well in the circumstances in which he found himself. I also believe that we have seen much to look forward to in future Budgets. The country is on the right economic road. The Budget will be well received in all quarters.

6.24 pm
Mr. Jim Craigen (Glasgow, Maryhill)

I always enjoy the way in which the hon. Member for Halesowen and Stourbridge (Mr. Stokes) wraps himself in the Union Jack, but on this occasion he has even more optimism than I usually associate with him. When I heard the Chancellor say that there is much still to be done, I wondered how long the country could afford the present Chancellor of the Exchequer doing it, because his Budget is no answer to the problems that the United Kingdom faces now or will face in the last quarter of the present century, as the hon. Member for Halesowen and Stourbridge said.

The Chancellor said that the defeat of inflation was still one of his objectives. The Budget can hardly be said to be a triumph for employment prospects in the foreseeable future. The right hon. Member for Old Bexley and Sidcup (Mr. Heath) had great difficulty in keeping a broad grin from his face when the Chancellor spoke about wage restraint and said that it would provide more jobs.

Many of the measures spelt out this afternoon by the Chancellor gave every indication that he intends to dampen down the demand for wage and salary increases and the level of wages and salaries generally and, therefore, the level of purchasing power within the economy. I thought that the proposal to chop the wages councils — a regulatory system we developed in this country for good reasons—was obnoxious. The low-paid sector of the economy will have the skids put under it with the disappearance of the wages councils. The recent Auld report on Sunday trading referred to the importance of retaining wages councils in the retail sector to preserve stability and to ensure the guarantees that the hon. Member for Rochdale (Mr. Smith) mentioned, because destroying wages councils will not necessarily help industry. It may destabilise the more responsible employers who look for a measure of stability in the running of their affairs, but the absence of regulation can destroy rather than create jobs.

We tend to have more investment and more interest in training employees in higher paid industries because it becomes more worth while. That raises the issue of the two-year youth training scheme. What will it amount to? It is all very well, as the Chancellor did this afternoon, to talk about schools preparing young people for the world of work. One wonders into what world of work they will be inducted. My experience is that schools have more problems from demoralisation and lack of incentive because the young people know only too well the bleak prospects that face them when they leave school If the youth training scheme is to be financed by the employers, it will be a completely different creature from the present one-year training scheme launched by the Government, the employers and the trade unions under the aegis of the MSC. Employers will expect a great deal more value for money if they are responsible for funding a substantial part of the YTS. The Government should recall the difficulties that they had with employers regarding the levy under the industrial training board system if they are thinking of moving towards a self-financing two-year youth training period.

I remind Treasury Ministers that on a previous occasion we considered the question of a compulsory youth training scheme. When the scheme was originally launched, I recollect that in the Select Committee on Employment we discovered that it would be more bother than it was worth and that it would probably cost more to create a compulsory scheme. We discovered that, for the percentage of youngsters who might opt out of the scheme, it was more worth while to have a voluntary system than to penalise young people who did not opt in.

The Government should have a care lest the expanded youth training scheme envisaged today becomes no more than an extension of compulsory schooling.

Mr. Dave Nellist (Coventry, South-East)

Will my hon. Friend confirm that, at the same time as the discussions to which he referred were taking place, a proposal was made by the Department of Employment to reduce the allowance with regard to the YTS to £15 a week? The amount that has been announced in the Budget will go nowhere to restore the allowance to what it would have been following its introduction by the Labour Government in April 1978, taking account of inflation or earnings, which would be £40 a week. The youngsters are already penalised by about £15 a week.

Mr. Craigen

My hon. Friend is right. The Government have been consistently mean-minded about the operation of the training allowance. They have more or less coerced the Manpower Services Commission into keeping it unfairly low on the ground that, were the allowance to be increased, it would be at the expense of the numbers of trainees. There is no doubt about the significance of the point made by my hon. Friend.

This matter raises once more the whole issue of training. We always seem to think that if only the apprentices were better trained, the economy of the country would be on a better footing. Why do we not start in the boardroom? It is there that the key decisions are made about the value, scope and quality of training. It is interesting that the Treasury is now coming round to abolishing the young workers scheme. I can remember the Minister of State, Department of Employment, conceding that it was 90 per cent. deadweight, which meant that employers would have been taking those youngsters on anyway. The difference was that they were getting a handout in the process.

The Government are coming round to the question of the long-term unemployed and the expansion of the community programme rather late in the day. I remember the predecessor of the present Secretary of State for Employment refusing to increase the number beyond 130,000. It now seems that there are to be another 100,000. There have been recent changes in eligibility for the scheme which are detrimental to married women. Moreover, I suggest that the scheme should avoid some of the bureaucratic red tape which creeps into such special programmes. I prefer to see worthwhile jobs being carried out by local authorities and other sections of the public sector than to have some artificial jobs created simply because they are the only alternative open to the Government.

I listened with interest to the Chancellor's proposals on reform of personal allowances. In my view, it is proper that men and women should be on an equal footing in these matters. With regard to the references to women in the home, I wonder whether this announcement is a precursor of the demise of child benefit, and whether the Treasury in these changes has in mind squeezing out child benefit in the operation of personal allowances.

Reference has also been made to pension funds. Most right hon. and hon. Members were inundated with letters arising from people's understandable fears about their future prospects. Coming at a time when all hon. Members are receiving letters about VAT on books, children's shoes and clothing, it struck me that this was a new form of Budget referendum by post—that we will judge by the volume of correspondence that we receive whether a project is likely to succeed. That was how the Chancellor eventually realised that he would need to keep off the grass with respect to pension funds.

By and large, this has been a Budget of Green Papers. If Green Papers were mentioned once, they were mentioned several times.

The Chancellor with his £2 gallon of petrol will hit some of the small business men about whom he always maintains he is so concerned and some of the rural areas, apart from motorists in general.

Last year and this year we debated the White Paper on public expenditure. We know that the prospects for aiding the construction industry are bleak. No messages of hope for the construction industry were tapped out by the Chancellor at the Dispatch Box. It must not be forgotten that on occasions more than 50 per cent. of the jobs available in the construction industry depend on public sector contracts, because private firms in the construction industry do not bother to distinguish whether the origin of a contract is public or private. They are interested only in the contract and the work that follows. With regard to the Chancellor's statement about business creating jobs, I remind him that the Treasury has done a great deal as a Luddite in the operation of its fiscal policy to destroy jobs, not least in the construction industry.

When we hear about the overshoot in public expenditure, it should be borne in mind that, with the surge in the dollar, as the Chancellor described it, the Trident programme will be more costly than hitherto envisaged simply because the value of sterling has plummeted.

We constantly hear about the need to contain public expenditure. However, we must ask about the cost of the Falklands programme in relation to public spending programmes generally and the absence of the necessary longer term political initiatives.

I do not think that this Budget will present any great hopes or joys for the prospect of employment or new work. It is another indication that the Chancellor, although he is still on his feet, is on the ropes in the operation of the economy.

6.38 pm
Mr. John Browne (Winchester)

I welcome the Budget, and I congratulate my right hon. Friend, in the hope that my right hon. and hon. Friends will pass on my sentiments.

I do not find it a glamorous or even an exciting Budget, but it is in my opinion very businesslike and interesting. The Budget has far deeper effects upon such matters as employment than almost any critic on either side of the House has yet acknowledged.

It will be borne in upon all hon. Members in time what the Budget is really about. It is about enterprise and the creation of business, and it is about the creation of real jobs —the jobs that I have not heard mentioned so far by its critics. No hon. Member has yet spoken about the creation of real jobs.

It is a significant achievement for our economy, the Chancellor said, and the economy has come through a great test. It has weathered the storm of the worst world recession ever recorded in history and a very worrying world economy.

At the same time, there has been a serious drain, like an open sore, because of the vastly expensive miners' strike. However, in the end it was worth it, because it will result in better industrial relations well into the next century. It is the beginning of the end of the British sickness. The attitudes of both management and employees are changing dramatically as a result of the strike. I applaud my right hon. Friend's resistance of the temptation to fall in line with the normal, traditional, highly popular give-away at Budget time. We must face the reality of the cost of the miners' strike.

The Budget is one for enterprise and real jobs. Some of its aspects, which have been grossly maligned by critics, will encourage enterprise and the creation of employment. We must encourage people to invest in business risk, because when that is successful real jobs are created. The new rules for indexation in the capital gains tax provisions will encourage investment. The allowance for the indexation of losses will encourage business risk that people can stomach. The rising of the thresholds on capital transfer tax also encourages business investment. The reduction of the retention period to five years on employee purchase schemes encourages inside investors —it encourages employees to invest in their companies, which creates a much better morale within companies.

The simplification of stamp duty reduces the cost of investment and therefore encourages the flow of funds into equity investments. The capital allowance scheme, with 100 per cent. write-off for high technology and short-term assets, encourages specifically and with fine tuning the direction of investment. High technology is the source of future revenue and jobs.

My right hon. Friend mentioned increased integration with the computerisation of the PAYE and benefit schemes. I applaud that, because it will ensure that benefits are paid not to everyone as a right, but to the needy dependent upon their level of need. We must all grasp that.

As the days and months unfold, people will increasingly realise the domestic effects of the Budget as an incentive to employment. The substantial increase in the expenditure and scope of the youth training scheme and the near-doubling in size of the community programme will increase job training. The raising of income tax thresholds will make inroads into the poverty trap and create a real incentive to be employed.

During the six years that I have been in the House, I have asked for a new system of national insurance contributions to lower the cost of employment and increase the incentives to be employed. Therefore, I warmly welcome the graduated scheme announced by my right hon. Friend, although I had hoped that it would be more eroded in total. However, I understand that this Budget must keep the ship on course in difficult waters, and it is not the time to give anything away.

I heartily applaud the measures to reduce the shackles of employment legislation on the incentive to employ. The extension to larger businesses of the rules that now apply to new and smaller businesses is a welcome trend. What is good for smaller businesses is good for business in general. I hope that my right hon. Friend will follow that trend in many other aspects to break down the shackles of employment and planning legislation, first on new businesses and then on business as a whole.

I have always urged a Budget to encourage real employment; we have been lucky in this Budget and I thank my right hon. Friend for that. However, I was disappointed in two specific areas. I heartily support the exclusion of the property category from the business expansion scheme, as its inclusion was a wild abuse. I support the inclusion of research and development companies.

However, my right hon. Friend has not proposed anything to deal with the problem of pool investments. Until the investments in a pool are actually invested in the companies, the rebate does not come through to the end investor. We should encourage small investors to participate in some of the pool investments. The scheme has not sufficiently encouraged start-ups as opposed to investment in businesses and the expansion of businesses. There must be something to encourage people to risk a start-up. It is too easy simply to pour money into an on-going business and obtain the benefits of the scheme. We want the money to go into new businesses—something that we have lacked for the past 40 years.

Secondly, I had asked that household employment should be allowed as a tax charge. That would reduce the black economy and have two huge advantages — it would increase the tax base and reduce unemployment. It would be a cheap investment for the Government.

I wholly support the tight control of the public sector borrowing requirement and the cash limits. However, when my right hon. Friend comes to control public expenditure and make cuts in certain areas, he might consider whether, rather than looking for across-the-board percentage cuts on Government spending, it would be better to go in for something widely mooted in the United States — the practice of zero budgeting, where every programme must be re-evaluated and rejustified with each Budget. The Budget is actually built up rather than simply cut down.

This practice has had beneficial effects in the United States. It has allowed for expansion in some areas and the complete cutting of programmes in other areas. It allows real cuts in spending with the minimum as opposed to the maximum amount of aggravation that usually comes with percentage cuts. That would be a good practice to follow in cutting public expenditure and ensuring value for money.

It is a low-key Budget, but an interesting Budget with fundamental effects upon both enterprise and the creation of real as opposed to unreal jobs.

6.48 pm
Mr. Roy Hughes (Newport, East)

Yet again we have been told that this is a Budget for jobs. It must be the mark 2 version, because during the 12 months since last year's Budget 143,000 more people have been put on the dole. The Budget contained the usual tax increases—I call them annual increments—on beer, wine, spirits, tobacco and, in a different category, vehicle excise duty. Car tax is to cost another £10 a year, yet cars are no longer a luxury. They are invariably used for journeys to work and for other essential travel. There will be a serious effect on road haulage. Most of our freight is carried by road, so the additional tax on road haulage will increase the cost of goods and services and make our firms less competitive in the markets of the world. Besides, it invariably fuels inflation.

Given the huge amounts already collected by the Government in motor taxation, less than a third of which is spent on roads and road maintenance, it is time that the Government learnt the error of their ways. We are often told of the American example and about how millions of jobs have been created in that country, but one fact that is overlooked is that America has always had a low-cost fuel policy. That has undoubtedly been of tremendous benefit to the American economy.

No one likes paying tax, but cuts in income tax are likely to have only a limited effect in creating new jobs, which allegedly is the Chancellor's aspiration, and, of course, there is always the possibility that, in a day or so, even these minimal decreases could be wiped out if the building societies increased their rates of borrowing.

The changes in national insurance contributions are more welcome. It is suggested that they will make it easier for firms to offer low-paid jobs. In 12 months' time we shall be able to judge whether the Chancellor's proposals will have had a more than marginal effect on the level of unemployment.

The Budget seems to have been drafted in a vacuum. One might think that Britain had only a marginal unemployment problem. The vast size of the problem seems to evade the Chancellor's attention. The chairman of the Conservative party tells us to stop whingeing because we are enjoying a boom. Ministers live in a world of unreality. According to the official statistics, 3.25 million people are out of work. Many thousands more are on training schemes, and thousands do not bother to register for employment because they know that there will be no vacancies for them. In Wales, over 183,000 people are on the dole. That is 17.3 per cent. of the work force, and the figure has risen by more than 10,000 since February 1984. When will the Government give people a little hope?

In the country as a whole, about 1.3 million young people are out of work. Their future is bleak indeed. Admittedly, the Chancellor has extended the training programme. In a sense we welcome that, but there is already some confusion about these matters. The Leader of the Opposition asked this afternoon whether there would be any effect on benefits if youngsters refused to join such courses. That question must be answered.

This year is the International Year of Youth. How sad it is that there should be such massive unemployment among our young people. Is it any wonder that they turn to glue sniffing and football hooliganism? The social and human costs of unemployment are enormous. In Thatcherite Britain the rich get richer, while 15 million live on or near the poverty line.

The National Health Service is being run down at a time when the demands on it are ever increasing. Waiting lists grow ever longer, especially in south Wales, and people are denied the treatment that they need.

Private education is subsidised, while state schools are starved of funds. We see the deplorable spectacle of schools organising bingo sessions in order to buy essential textbooks. The teachers, who play a key role in our society are locked in a major industrial dispute over the poor level of their salaries.

Investment in higher education is essential for the future economic, social and cultural well-being of our country, yet our universities have suffered a 10 per cent.

cut in their funding between 1980–81 and 1984–85. That represents a loss of £460 million of vital resources. During the same period, 30,000 well qualified young people who would normally have been assured of university places have been turned away. That is a waste of ability and talent.

The biggest job is to put our people back to work. The Chancellor should have announced a massive investment programme for the public sector, to improve our industrial efficiency and our environment and to build up our rail and road network. What could be more logical at present than a major housing drive? The materials are largely home-produced. In south Wales our chief housing officers tell us that much of our housing will be fit only for slum clearance by the turn of the century. A large new housing programme, public and private, could take thousands of people out of the dole queue at a stroke.

We all know that there are no easy answers in the attempt to halt Britain's decline, but investment must be a key factor. However, private companies have shifted production and capital overseas to the extent of £50,000 million since 1979. The Government should intervene to stop Britain being undermined in that way. That money should be invested at home.

In the past we have always been told that there is no alternative, yet in recent weeks and months a host of alternative economic packages have been put forward. The Labour party itself has put a major package together. No doubt it will be outlined by the shadow Chancellor in the debate tomorrow afternoon. The CBI has its plan, and so do various journals, such as the Daily Mirror. The former Prime Minister, the right hon. Member for Old Bexley and Sidcup (Mr. Heath) has suggested a £5,000 million package to boost the economy and create jobs. The Government should take notice of people such as the former leader of the Conservative party.

There are alternatives, yet all that we have been given is another dose of monetarism. We need a change of policy. In recent weeks there has been much speculation about the future political career of the Chancellor. This may well be his final Budget. The future well-being of Britain now demands a change of policy and a change of Government.

Debate adjourned—[Mr. Peter Lloyd.]

Debate to be resumed tomorrow.