§ Relevant documents: European Community Document No. 9792/85, Annual Economic Report 1985–86 and the unnumbered document, Annual Economic Report 1985–86 (final version as adopted by the Council).3.59 pm
§ The Paymaster General and Minister for Employment (Mr. Kenneth Clarke)
I always believe, in my simple way, that it is possible to get some agreement on objectives on both sides of the House. I hope that there is broad agreement, certainly in the county, that the main aim of the Budget has to be to maintain the present excellent performance of the economy in such a way as to speed up the number of new jobs which will be created. [Interruption.] It is no good Opposition Members deriding that statement of aim and description of the economy. One of the most notable aspects of the Budget statement of my right hon. Friend the Chancellor of the Exchequer was the extremely good outlook that he was able to describe to the House and the country.
We face the best economic outlook that most people of today's working generation have ever faced in their lifetime. We expect high growth, low inflation, falling oil prices and stable exchange rates at levels at which we can be competitive. Yesterday interest rates fell. I do not know of the experience of my hon. Friends or of Opposition Members, but most of the people I have met over the past few years in the manufacturing industries have told me that those are the conditions that we must try to create. All these things explain why employment has been rising faster in the United Kingdom than in the rest of the European Community. First, as a general proposition, the Chancellor has created the conditions for jobs. I congratulate my right hon. Friend on that and on his Budget measures. In my opinion, if my right hon. Friend had not used the slogan "Budget for jobs" last year, he could have used it forcefully for this Budget.
When people first react to a Budget, they immediately take on board the tax changes as they affect day-to-day life—a penny off the basic rate of income tax, 11p on a packet of cigarettes, nothing on beer, and so on. It will 425 take a little more time for people to appreciate the complete extent of the employment measures in this Budget. They are extensive and they are ambitious. But, quite predictably, the principal complaint of all the Opposition parties is that they do not appear to cost enough to the taxpayer.
Most of our critics tend to pluck large figures of public expenditure out of the air and then claim that thousands of new jobs would be created if this spending went in certain directions. I have to say that, having considered most of the rival propositions which have been put forward over the past few months, the connection between the cash and the jobs is usually highly debatable.
In the Budget we have programmes which will be less expensive to the taxpayer than those urged upon us, but they will be more effective. We now have the opportunity to consider these measures in greater detail. First, we have measures designed to produce more new businesses and new jobs. The enterprise allowance scheme has been highly successful in helping unemployed people to set themselves up in business. Very many unemployed people—surprising numbers—would like to have a go at working self-employed in a business of their own. We offer support of £40 each week for a year and business advice for many who do so. My right hon. Friend announced in the Budget that we are now nearly doubling the size of this programme. Now we will be helping no fewer than 2,000 unemployed people each week to start working for themselves.
§ Mr. Ian Wrigglesworth (Stockton, South)
The Minister is seeking to proclaim the cost-effectiveness of expenditure on this scheme as compared with other schemes. Does he agree with his Department's figures that, for every 100 jobs created under this scheme, only 50 real jobs are created because they are replacing 50 other jobs—jobs which already exist? If the Minister had spent the money on the community programme, there would have been 93 new jobs created for every 100 jobs.
§ Mr. Clarke
We have studied carefully the cost per job created in each scheme, as we have for all the schemes that I shall outline. I shall come later to the expansion of the community programme.
All these schemes which we are expanding compare extremely favourably in cost per job terms with any of the rival propositions urged upon us. There is some deadweight in all of them—some displacement, some small businesses which do not succeed—but I can assure the hon. Gentleman that the enterprise allowance scheme has been highly successful. The vast majority of the new businesses thrive and many will provide fresh employment as they plan to take on employees within a year or two of starting up. I am not comparing this with the community programme; we are expanding that as well. I compare it with the propositions contained in the rival budget of the alliance, many of dubious quality and a high cost per job.
I assume that the hon. Member for Stockton, South (Mr. Wrigglesworth) will support the enterprise allowance scheme. The fact that we shall help 2,000 unemployed people each week is welcome.
§ Mr. David Howell (Guildford)
Although I welcome strongly the expansion of the scheme, is my right hon. and 426 learned Friend aware that in some cases the taxation liability arising from being paid the enterprise allowance can be larger than the enterprise allowance? Will he look at this aspect in reforming the scheme?
§ Mr. Clarke
I am grateful to my right hon. Friend for drawing my attention to that. I think that my right hon. Friend the Chancellor announced in the Budget ending, and certainly has the intention of ending, that tax anomaly. It is a valid point, and my right hon. Friend the Chancellor has agreed to put it right in the Finance Bill.
We are dealing with the existing measures which will be expanded and we are introducing a new version of the small firms loan guarantee scheme, which will last for three years. Over the past seven months since I have been in the Department, I have repeatedly met business men whose enterprises are beginning to thrive and expand and who have impressed upon me how this scheme was essential to give them the working capital they need to start. The main snag with the old scheme was that loans were expensive with extra high interest being paid. We are halving the premium on new borrowing to 2.5 per cent. This will make the scheme even more successful and attractive to small businesses which need capital to expand.
The Opposition can never decide what their attitude should be to the EAS, the small firms loan guarantee scheme, to small firms, self-employment and personal enterprise. I have to tell them that small firms and self-employment are among the major sectors for employment growth worldwide and that we have a long way to go before we catch up with other countries. The Labour and trades union movement's apparent obsession with "smoke stack" industries is yet another example of their determination to put the clock back. The Government are determined to help those who wish to work for themselves or to set up small businesses—not least because they have to make an important contribution to the continuing growth in employment in Britain.
§ Mr. John Prescott (Kingston upon Hull, East)
We fully support all programmes which increase economic activity and increase jobs. There is no doubt about that. It would come a little bit stronger from the Minister for Employment if he recognised that many Labour authorities, through their enterprise and economic units, have created many small businesses and they are often much more effective than the Government. The Government and, in particular, the Chancellor have denied £8 million to the GLC to do that type of work.
§ Mr. Clarke
I shall look forward to receiving the support for small business schemes which the hon. Member for Kingston upon Hull, East (Mr. Prescott) has promised. It is certainly true that the Labour and trades union movements are not in the forefront of initiating policies which seek to expand self-employment or small business in any way.
The hon. Member refers to the activity of local authorities with regard to small business support and enterprise. When such support is well directed and carefully thought out, the Government are quite prepared to support it. I recognise that some councils do a reasonable job. However, the effectiveness of councils' actions varies considerably up and down the country. In my opinion, there are certainly a large number of local 427 authorities which ought to pay greater attention to keeping down the rate burden on businesses in their areas than they do in attempting to get into the enterprise policy area.
I certainly query the cost per job effectiveness of many of the things done by local councils. I shall probably have the support of the hon. Member for Kingston upon Hull, East when I state that the schemes I have described are cost effective and well directed. I have dealt only with expanding the existing successful programmes. We are also introducing two new programmes. One is for young people entering employment for the first time. We have called it the new workers scheme.
The new workers scheme will provide a direct financial incentive for employers to recruit 18 to 20-year-olds by paying them a subsidy of £15 a week for 12 months. We have seen a steady fall in the rate of unemployment of young people under 18 over the past three years. We are anxious that employers should be able to offer inexperienced young people over 18 the jobs at the start of their career ladder that many need to start their working lives. We expect that no fewer than 70,000 young people will benefit from the scheme in its first year at a cost of some £25 million.
This scheme will build on the two-year YTS which is being launched in two weeks' time and which will provide quality training leading to recognised qualifications for 16 and 17-year-old school leavers. I hope—I repeat the sentiment with which I began—that we can all agree on the value of giving school leavers a better start in the world and better job prospects through YTS. I believe that the great majority of sensible people in industry are positively enthusiastic about our new scheme, which will be a permanent feature of training for work.
However, I noticed that, only last week, the hon. Member for Kingston upon Hull, East described the youth training scheme as a "skivvy" scheme. As I have said before, that was a ludicrously irresponsible way for a member of the shadow Cabinet to dismiss a new system of youth training supported by employers, trade unionists, the CBI and the TUC. The hon. Gentleman's view of the YTS is not shared by young people. We have carried out surveys to ascertain what young people think of the scheme. More than 1 million young people have entered the YTS since 1983. Our surveys show that 80 per cent. say that their training was worth while. Two thirds of YTS trainees get jobs immediately or move straight on to further education or other forms of training.
What the hon. Member for Kingston upon Hull, East says is not just irresponsible or politically damaging to his party, although I believe it is certainly that—it is certainly damaging his credibility in the industrial world—but is positively damaging to the interests of the more gullible young people who are influenced by what he says. Calling YTS a "skivvy" scheme or "slave labour", or whatever the current cant phrase of the Labour Left maybe, has only one effect — to make some young people suspicious of YTS, to put them off joining it and, therefore, to make them miss out on an important chance of improving their job prospects. That is what the hon. Gentleman and the more Left-wing of his colleagues in the Labour party are doing and the sooner they realise it, the better.
§ Mr. Prescott
I am glad that the right hon. and learned Gentleman has got that off his chest. I said at the press conference I attended that many of the schemes under YTS 428 are cheap, exploitive and skivvy schemes. [Interruption.] Another Minister asked me for evidence and I sent him parcels and papers — all the details. He left before saying whether he thought that I was right about private agencies. Many people are concerned about this matter. The Paymaster General has talked about industry's record. Its record in putting money into training is deplorable, as the Manpower Services Commission has shown in the piddling amount of money it put into training compared with our competitors.
§ Mr. Clarke
The hon. Gentleman's second point was a good, hearty and virulent attack on something about which I was not speaking. I referred to his remarks about the two-year YTS and YTS. On the hon. Gentleman's first point, he knows perfectly well that we are describing the introduction of a two-year scheme which will provide for training provided by approved training agencies. Of course, in the early days, the training was less than satisfactory and, no doubt, there are still some cases in which we have not improved that position. Everyone in the CBI, the TUC and the MSC has striven to eliminate that unsatisfactory training. The hon. Member for Kingston upon Hull, East knows that the press conferences he gives turn into virulent attacks on YTS which deter young people who might otherwise take up this opportunity in April.
I shall at least give the hon. Member for Kingston upon Hull, East credit for one thing: when he attacks YTS, or aspects of it, he seems to understand what he is attacking. He follows and studies his subject. Yesterday, I could not help noticing that the leader of the Liberal party, in introducing his ten-minute Bill, said:I accept that the YTS is improving, but the process is painfully slow and it needs speeding up."—[Official Report, 19 March 1986; Vol. 94. c. 302.]I do not know whether the right hon. Gentleman was seriously suggesting that the Liberal party could introduce a new, improved form of YTS before 1 April this year. I do not know whether he has tried telling employers, unions and managing agents, who, in my experience, are working flat out for the success of the new scheme, that progress is "painfully slow". The way in which the right hon. Gentleman introduced the Bill showed the pathetic irrelevance of the Liberal party to employment and training.
§ Mr. Michael Foot (Blaenau Gwent)
I assure the right hon. and learned Gentleman that I do not seek to intervene on behalf of the Liberal party. I should like to put to the right hon. and learned Gentleman the question I put to him before on the second year of YTS. Why does he not sort out properly the matter of the extra burden imposed by the present arrangements for the second year on local authorities, especially those that have given such great assistance in making the schemes work? Surely the right hon. and learned Gentleman would be very encouraging if he said that the whole of the extra cost would be borne by central Government and that local authorities, especially in areas of the highest unemployment, would not have to bear that extra burden.
§ Mr. Clarke
I have had a lengthy exchange on this matter before with the right hon. Gentleman. I am sure that he went back to his constituency and checked up on our exchanges. We have no shortage generally of the two-year places we require, which are provided by employers in the public sector and in the private sector who accept that, in 429 the second year, they must pick up part of the burden. This reflects the fact that, in that second year, the trainees are undoubtedly giving added value to the employer. Local authorities are offering second-year places.
The local authorities that claim they are getting into most difficulty are those that are bowing to pressure from their branch of the National and Local Government Officers Association to top up the allowance payable to YTS trainees. That is a totally self-imposed burden chosen by local authorities and not one to which the Government could agree to divert funds from the mainstream of their training policies. I cannot understand why the local authority of the right hon. Member for Blaenau Gwent (Mr. Foot) has difficulties which other local authorities in equally hard-pressed areas do not have if it is paying the YTS allowance at the level accepted in the programmes generally.
§ Mr. Foot
The right hon. and learned Gentleman has got it wrong again. The same demand is faced by all the local authorities in our area — not just my local authority. Will the right hon. and learned Gentleman look at the matter afresh and ascertain whether the whole of the extra cost in the second year can be borne by central Government rather than by the local authorities?
§ Mr. Clarke
I shall look again to ascertain whether all local authorities in south Wales are agreeing to NALGO's demands that they top up the YTS allowance to an unnecessary level. If that is not happening, I cannot understand why local authorities generally in the right hon. Gentleman's area cannot participate in the two-year YTS on the same basis as many other local authorities throughout the United Kingdom. I do not accept that this is a general problem which we are failing to tackle. I believe that, if local authorities, as private sector employment and voluntary bodies, continue to participate, we shall find that the two-year YTS is a desirable and permanent addition to the training and preparation for work of young people.
I began by describing the new workers scheme which will follow on from the two-year YTS. It is an extremely valuable addition to everything we are doing to continue to reduce unemployment among young people.
Our second new programme is a package of measures designed to help the long-term unemployed which we call our restart programme. Ever since we began to work together last autumn, my right hon. and noble Friend the Secretary of State for Employment and I have become increasingly convinced that it is our duty to help those people who are in danger of completely falling out of the world of work. After a year or more of unemployment, despair and disillusion can set in in the mind of an unemployed person. Perversely, employers are reluctant to take on people who have no recent record of work to show that they can hold down a job and cope with the disciplines and pace of work. I have found in my contacts with my opposite numbers in the European Council of Ministers that the problem of long-term unemployment is an emerging problem in all our economies and is obviously one of the most important problems we should tackle.
Our plans, which we have carefully drawn up, are concerned with the social consequences of unemployment and the dignity of those seeking work as well as the creation of jobs. That approach underlines our ambitious 430 plans to help the long-term unemployed. We have deliberately chosen to make a high priority of the 1.3 million people who have been registered as out of work for more than a year. We must not allow them to be left out of the better job market that economic recovery is producing.
We propose a person-to-person approach on an individual basis to each and every man and woman in the United Kingdom unemployed for more than a year.
§ Mr. Clarke
It is ridiculous for the hon. Gentleman, before he has addressed himself to the details, to react in his typically aggressive way to the idea that we are turning our attention to the individual problems of more than 1 million people. If the hon. Gentleman will refrain from uttering his slogans for a minute and will follow the details, I shall challenge him to criticise our approach or to say in what way he would build on it. I cannot believe that the hon. Gentleman would scrap it, abandon it or seek to oppose it in any way.
§ Mr. Clarke
I have never before faced an hon. Member across the Dispatch Box who barracks so persistently on something which he then says he will not oppose.
§ Mr. Prescott
Anything which gives help or advice to the unemployed we will welcome. What the unemployed want after the advice is the jobs. There are 20 unemployed for every one vacancy the Government offer. All the right hon. and learned Gentleman can be offering is tea and sympathy, not a job.
§ Mr. Clarke
That is not true. If the hon. Gentleman will listen he will discover what we are talking about and what he is barracking.
He agrees with anything that offers individual support for the long-term unemployed. That involves a substantial effort when we are talking about 1.3 million people. Every one of those long-term unemployed will be invited, in the first place, to a discussion with an adviser in a jobcentre, who will consider the personal position and needs of each one. The discussion will determine which of a menu—for lack of a better phrase—of opportunities, some new and some already established, is most suitable for the person being helped. As I have already said, it is a massive undertaking, in organisational terms alone, to address ourselves to the individual position of well over 1 million people and offer them individual help. It amounts to a revolution in our approach to long-term unemployment.
Let me describe the process and see whether I can get more agreement not to oppose from the hon. Member for Kingston upon Hull, East. The jobcentres will take the initiative in calling in the long-term unemployed, every single one of them, by March of next year. We are recruiting 2,000 extra staff—an increase of nearly 25 per cent. on the staff in the jobcentres—to be able to offer the help I have described. Beyond the initial interview at the jobcentre, we are providing a whole range of courses and programmes designed to improve the chances of the long-term unemployed finding work.
In the first place, we are increasing the chances of their finding work by expanding the community programme to 431 a total of 255,000 places by the end of this year. That will mean that in a full year the community programme will be able to provide jobs for some 300,000 people.
Secondly, we are greatly extending the network of job clubs, which have a very impressive record in helping the long-term unemployed back into work. I do not think that the shadow Chancellor, who is not here today, altogether understands that. The shadow Chancellor said yesterday that job clubs were places where, as he understood it,young people come together and discuss why it is that they are out of work."—[Official Report, 19 March 1986; Vol. 94, c. 307.]That is absolute rubbish, and if that is his understanding, he should study the concept of job clubs more closely. Job clubs are places where long-term unemployed people of all ages come together for a minimum number of hours each week to be helped by a member of our staff in a sustained effort of job application, seeking every suitable advertised vacancy in the locality.
What was wrong with the figures of the hon. Member for Kingston upon Hull, East is that he talked only about vacancies in jobcentres, which are going up. As we all know, only a small proportion are ever notified to jobcentres in the first place. The job clubs actually help the people who participate to pursue not only jobcentre vacancies but all those advertised in the local newspapers. People are given the support of a member of staff in chasing all those jobs.
Job clubs are one of the most successful measures we have adopted. Contrary to what the shadow Chancellor appeared to assert, our records so far show that nearly two thirds of job club members have found work. If the hon. Member for Kingston upon Hull, East or any other Opposition Member visits a job club he will find spectacular individual examples of people who have been out of work for some time who have been placed in jobs by this method.
§ Mr. Tony Baldry (Banbury)
Does my right hon. and learned Friend agree that it is strange that in many areas employers are looking for people to work for them but cannot get the people they want with the right skills? Does he also agree that job clubs will be a great help in giving people advice as to what skills are needed in the market place and where they can go to be trained in those skills?
§ Mr. Clarke
That is the point of the initiative we are taking to provide individual advice for the long-term unemployed. I am working through what I have described as the menu of opportunities we offer. When some people discuss their individual situation it is found that they require training and that if they acquired some skills which were within their grasp they would be much more employable. Others are already equipped to find work but they are helped by a job club to find it.
Some people will be able to obtain help from other schemes we are extending, such as the new restart courses, which help people to brush up their job-finding skills. Many of the long-term unemployed are not good at presenting themselves and employers have something of a prejudice against the long-term unemployed, who they believe will not satisfactorily hold down a job.
Finally, over and above that, we are making a £20 a week job start allowance available nationally so as to provide a direct financial incentive to the long-term unemployed person to return to work, even if he has to take a lower paid job to get started again.
432 We have carefully tried out that package of measures. The programme we now call the restart programme was previously tried out in nine totally different towns as diverse as Crawley and Dundee. We have had no time to do a full academic study of the results because we are acting urgently and we want to crack on with tackling the problem. However, since we started our pilot schemes, we have noticed that while unemployment fell nationally in January — a bad month — by only 0.1 per cent., unemployment in our restart trial areas fell by 1.1 per cent. We have been carrying out much more detailed and sophisticated monitoring and what we have seen so far has given us confidence to go national in the restart programme.
I know what the Labour party's reaction is. It is wholly predictable, as it has been throughout the debate. It will say "That cannot be good enough; it does not cost enough." Anything in a Socialist programme has to cost a large amount of taxpayers' money. Even our moderate critics tend, as I said at the beginning of my speech, to talk of billions of pounds of public expenditure whenever they talk of unemployment in order to give more credibility to their proposals.
If I address the only coherent alternative to what we are putting forward, I suppose the most fashionable ingredient in every instant wonder cure for unemployment being peddled at the moment is increased spending on infrastructure. I have no intention of being totally hostile to spending on infrastructure when I am a member of Government who are already spending greatly increased amounts on the infrastructure. I played a part in restoring the trunk road programme and the hospital building programme, which had both been savaged by our Lib-Lab predecessors. New hospital building in particular had been axed by a third in 1976 by the people who are now converted to the wonders of infrastructure spending. Sweeping speeches about going further and thereby solving unemployment have to be examined with scepticism and care.
The hon. Member for Kingston upon Hull, East has followed me in some of the things I have done in Government and Opposition. He and I have faced each other on other issues and he knows as well as I do, and should remember from personal experience, that on transport and health when we need to spend money, we spend it. Since 1979 we have increased capital spending in real terms, over and above inflation, on motorways and trunk roads by almost one quarter. Spending on motorway and trunk road repairs has increased by 100 per cent. in real terms since 1979. I am working through the list of items that have appeared in the speeches of Labour Members. I have not noticed that they have omitted roads. The alliance always mentions roads, as does the Labour party. We have spent 16 per cent. more in real terms on hospitals since 1979.
The problem that arises in those areas and that makes such a nonsense of the Opposition's sweeping assertions is often one of delays to projects rather than unwillingness to spend money to meet real needs. It typically takes 10 years to build a road, from its planning stage, and 15 years for a hospital. Personally, I trust that my successors at the Department of Health and Social Security are tackling that with the same vigour as I was trying to, because those lead times would be regarded as ludicrous in any private sector schemes. However, the delays are caused by public inquiries and bureaucracy. They are more of an enemy to 433 the infrastructure in those areas than tight money or lack of financing. That is relevant to our debate. Those problems have to be borne in mind. That is why claims to boost infrastructure spending are often impracticable as well as unnecessary.
The real problem is that modern construction methods are capital intensive, not labour intensive. Person-to-person service industries are the labour intensive activities in a modern economy, not public works. Capital programmes that are perfectly desirable in themselves to cut out transport costs and improve our environment are fairly useless when looked at as special measures to assist the unemployed.
Arguments are advanced about all the unemployed building workers. The Opposition are being converted. At one time they listed sewers. This is the daftest example of all to give when seeking to suggest that increased spending on the infrastructure will produce more jobs. The Opposition are now talking only about housing. That, at least, has narrowed the scope. Modern tunnelling methods mean that the number of men who are required to build sewers is tiny. It is good to build sewers to prevent holes appearing in roads but, as a special measure in itself, it is not a good way of trying to put the unemployed back to work. Even the favourite arguments about all the unemployed building workers—those who might be employed in housing—are hard to sustain in many parts of the country. This has relevance even to those who say that housing is the main method of boosting employment. I have read a recent report of the Federation of Master Builders. It is headed "Work goes begging as firms struggle to get craftsmen."
§ Mr. Clarke
I shall give way in a moment. The hon. Gentleman's alternative budget will rely heavily upon sudden boosts to infrastructure spending to create jobs.
§ Mr. Clarke
Let the hon. Gentleman listen to this quotation from the magazine Building of 7 March 1986 and then I shall give way. It is based on a report of the Federation of Master Builders. It says:Small and medium-sized firms affiliated to the Federation of Master Builders are reporting labour shortages throughout the country. Some companies are turning down work because of the unfilled vacancies, which are blamed mainly on poor training. A survey carried out by the Federation of Master Builders shows that 39 per cent. of the 528 member firms who responded are suffering skills shortages even in areas of high unemployment. London is worst hit with 53 per cent. of firms short of manpower.
§ Mr. Clarke
I trust that the hon. Member for Blackburn (Mr. Straw) will make a speech during the course of the Budget debate. He has tried to intervene in every Budget speech that I have listened to so far.
§ Mr. Clarke
Before the hon. Gentleman makes his speech, he ought to consider the fact that the number of people who are being trained in skillcentres has greatly increased during the last 12 months. Let me continue my quotation, and then I shall give way either to the hon.
434 Member for Blackburn or to the hon. Member for Stockton, South, if either of those Members is prepared to stand up. The following quotation is also relevant. It says:
In addition, 14 per cent. of firms reporting labour shortages could not find general operatives, despite the high number of labourers registered as unemployed. The overwhelming majority, some 74 per cent. have been unable to fill job vacancies for six months or more, according to the report, with 60 per cent. being 'limited in the workload they could take on as a consequence'. Many firms wanted to employ direct labour but found that the growth of the black economy and the number of self-employed tradesmen prevented 34 per cent. of firms from doing so.Relevant lessons are to be drawn from that. I agree with the quotation given by the federation's national director, Bill Hilton, at the end of the report. He said:The report's findings prove that we have to do far more to encourage carpenters, bricklayers and other skills into the industry. There are lessons for the Government and the industry.But there is also a lesson for the Opposition that is relevant to this debate. When they put forward alternative budgets they claim that increased, instant spending will increase the number of jobs. However, those who are seeking workers cannot find labour. Most of the claims in the alternative budgets of the Labour, Liberal and Social Democratic parties that millions of pounds of new building work would take thousands of building workers off the dole are not sustainable.
§ Mr. Wrigglesworth
It is remarkable that the organisation upon which the Paymaster General relies for this report also spends a considerable amount of time pressing the alliance and others to increase expenditure in the very areas that he has decried. Is the right hon. and learned Gentleman aware that our budget proposals both for last year and this year do not rely entirely, as he seeks to suggest, upon massively increased spending on capital projects? They include a spread of proposals, including education and training in particular, to ensure that the skill shortages in my area, about which many complaints are made, do not exist in the future.
§ Mr. Clarke
I shall try to refer to as many ingredients as possible in the alleged alternative budget, but I am now dealing with the Government's Budget. If the hon. Gentleman says that the Federation of Master Builders has lobbied his party for increased spending on the building, I can believe it. He has been in politics long enough to know that most of those who come along to lobby do so because they want the amount of building to be increased in their area. My point is that the experiene of the Federation of Master Builders is that they are turning away work because they cannot recruit labour, including unskilled labour. Therefore, we have to address that problem before that ingredient of the hon. Gentleman's policies, which he says would increase jobs, can be sustained.
§ Mr. Clarke
I shall give way in a minute. After I have dealt with training, I shall listen to what the hon. Gentleman has to say.
Of course there is a training problem. That is why we are putting so much effort into training. Recently I visited the new training complex of the Construction Industry Training Board at Bircham Newton. The CITB is the major agency for providing youth training scheme places. It has provided 18,000 training places for young people, 435 and next year it will be taking full advantage of the Government's new programme of two-year training. No doubt the hon. Member for Kingston upon Hull, East will continue to try to put young people off taking advantage of those training schemes by attacking them as "skivvy" schemes.
§ Mr. Prescott
The right hon. and learned Gentleman is introducing a great deal of confusion into the debate. The Government have abolished 16 of the 23 industrial training boards. The Construction Industry Training Board is one of the few that remains. In that sense, there is control by industry, employers and unions over the introduction of a proper degree of training into the youth training scheme. I fully endorse and accept that point, but that is not the experience in the majority of youth training schemes.
§ Mr. Clarke
I repeat what I said earlier—that we are concentrating upon improving the quality of the training that is provided in the youth training schemes. Mistakes were no doubt made during the early days of the YTS. Everybody is now concentrating upon providing good quality, two-year training from 1 April next. Substantial changes are being made. From 1 April, those who provide places will have to be approved training agencies. However, that does not appear to be leading to any abatement of the hon. Gentleman's attacks upon the scheme. I believe that it should. The way in which he attacks the scheme is clearly designed to put off young people. He is playing up to the audience behind him, which he knows contains—[HON. MEMBERS: "Not so much of an audience."] No. We keep returning to the same point.
We are told that that infrastructure spending is the main alternative. When one looks at the alliance alternatives, one finds that substantial reliance is placed on the community programme. I looked carefully at the alliance's alternative budget to try to find out where the large number of jobs that they claimed would be created could be found. I found that those which had any credibility were boosted significantly by taking the target that we had announced before the budget of 230,000 places and calmly doubling it to 460,000. I take that imitation as a compliment. The alliance has slipped into its policy a calm invitation to increase the successful community programme that this Government have already launched. We have been expanding it flat out, to the limits of what is practicable.
We have to improve the quality of the work that is being provided in the community programme. It has to be of real quality for those who are engaged in the community programme so that at the end of 12 months they can demonstrate that they have done a worthwhile job that involves real work disciplines. It also has to be of value to the community as a whole. That is why we are devising schemes of crime prevention by putting in locks and similar equipment for elderly people and of energy conservation by insulating the homes of elderly people. My right hon. Friend the Secretary of State for the Environment is preparing a programme of schemes relating to the environment, as is my right hon. Friend the Minister of Agriculture, Fisheries and Food to help farming in rural areas. This will involve over 250,000 people at any one time in schemes of real quality.
To put together an alternative budget, all the alliance can do is pluck a figure out of the air and claim that it can 436 double the whole programme to a little less than 500,000 people, and I have to say that we would be back to counting lamp posts if we tried to expand to that degree and at that level. It may make a good speech, but it does not make any more credible a policy for unemployment, any more than does asserting that infrastructure spending of one kind or another—even on housing, which the Opposition appear to accept is the only one worth arguing—can make a substantial contribution to the number of jobs that it is claimed will be achieved if these alternative policies are implemented.
§ Mr. Sydney Bidwell (Ealing, Southall)
The other day I was talking to a bricklayer who was working near my home. He has come from Glasgow to work in the south because he cannot get employment in his trade in Glasgow. The right hon. and learned Gentleman has given these bland assurances that building employers cannot get skilled workers, but is there not something wrong with the structure? Is it a fact that skilled building workers cannot get work in the north and come to the south in search of it? Is that what is going on and, if so, to what extent is it going on?
§ Mr. Clarke
I find that astonishing, first, because, when one visits Glasgow, one sees an extensive amount of rebuilding going on, particularly in east Glasgow. Secondly, according to the claims of the Federation of Master Builders, in the north, which in its submission includes the whole of Scotland and a bit of northern England as well, 20 per cent. of firms were reporting shortages of labour while in London 53 per cent. of employers were reporting difficulty in finding labour. If a bricklayer is skilled and produces work of quality, he ought to be able to find a job. That is why we concentrate so much on building up the amount of training that is given to bricklayers.
I have spent some time setting out our employment propositions in the programme we put together, which was announced in the Budget of my right hon. Friend. I think that the full extent of it has not yet been appreciated, but it will be as we start to tackle the problems of the long-term unemployed and the need for training throughout the country.
I will not spend much more time on the policies of the Opposition because I think that, on the whole, they exist in speeches rather than in reality.
We heard yesterday from the shadow Chancellor that he is no longer into big spending. He is indignant about the Chief Secretary's attacks on his £24 billion programme, which the shadow Chancellor combines with a clear commitment not to raise the basic rate of income tax and an apparent determination—
§ Mr. Clarke
No, he did not. The shadow Chancellor is indignantly trying to refute the £24 billion. My right hon. Friend's answer was quite clear. He said that he had looked at the figures and was prepared to reduce one and increase another on what the Labour party keeps saying. The shadow Chancellor combines this with a commitment, that I have heard him make twice, that he will not raise the basic rate of income tax and an apparent determination not to oppose our 1p reduction in the basic rate.
If the shadow Chancellor and his right hon. and hon. Friends on the Opposition Front Bench seek to assert that 437 £24 billion is not the case, I cannot help thinking, as I did yesterday, that I hope they have had a word with the shadow spokesmen on social services, on education and on health who have been going round the country showering promises like confetti—[Interruption.] It is interesting to note that the shadow Chancellor will apparently say no to all those proposals that have been made by the hon. Member for Oldham, West (Mr. Meacher) and others of his hon. Friends.
As the Opposition clearly do not like what I am describing of their programme, let me give my understanding of what the scaled-down programme amounts to. The shadow Chancellor has now come down from the giddy heights of £24 billion towards the lower foothills of £6 billion or £7 billion. Half of what he describes as a "drive to create jobs" came from a straightforward addition to what he previously said regarding the recent Select Committee report. He added that £3.3 billion would produce 750,000 jobs as a result of adopting the Select Committee report. As shadow Chancellor, he ought to know that the gross cost of the Select Committee's proposals is at least £6 billion. The one-year jobs in the building industry and the one-year jobs in the Health Service proposed by the Select Committee merely repeat and do not add to the shadow Chancellor's other proposals, as he implied in his speech yesterday. He has taken on a new commitment to a £40 per week subsidy to the employer for every long-term unemployed person taken on, without any ceiling on the pay of that person. I can only say that that would displace thousands of people from their jobs if it were adopted as a general proposition.
I do not know—no doubt another spokesman will explain to the House—whether the shadow Chancellor is now taking on hook, line and sinker the Select Committee proposals, as appeared likely, only a few weeks after they came out without any further examination. The fact that he seems to have done so is a surprise to me. Alternatively, does his throw-away line yesterday suggest that, until the Select Committee came along with its report, he was desperately short of any employment policy? There must be a purpose in measures to help the unemployed, and that is what is plainly lacking in the right hon. Gentleman's plans.
§ Mr. Ron Leighton (Newham, North-East)
I suspect that the Government also are desperately short of an employment policy, and I would be pleased if they took on board the Select Committee's report. Will the right hon. and learned Gentleman guarantee to use his influence to ensure that there is a proper debate in the House on the report of the Select Committee?
§ Mr. Clarke
If the "drive to create jobs" now comprises the main part of the Opposition's policy, no doubt there will be rather more frequent opportunities to debate that.
It has been suggested that I should leave the Opposition to speak for their own policies. I therefore look forward to hearing the hon. Member for Kingston upon Hull, East describe his party's commitments to reducing unemployment after he finishes what will no doubt be his inevitable denigration of the measures that I have announced.
I will be fair to the hon. Gentleman. He can sometimes be a very reponsible politician. Not for him the reckless 438 protestations of the shadow Chancellor, who a few weeks ago exhorted all local authorities to get their plans ready for an orgy of capital spending in the event of a Labour Government getting back. The hon. Member for Kingston upon Hull, East spoke to a fringe meeting on 7 February at the Labour local government conference at Norwich, where he was candid and frank, as he often is. I have made inquiries of those responsible, and I am assured that the Municipal Journal of 7 February 1986 reported him accurately. It certainly looks authentic, and it was his usual forthright stuff to Labour Councillors. I will quote verbatim that report. It refers to him as the Labour spokesman on regional affairs, which is probably a reflection on the hon. Gentleman's spokesmanship on employment. It said:'Central Government cannot be indifferent to the way you spend your money' he told delegates. 'And we must start spelling out exactly what we are going to do instead of simply issuing slogans to win power.' He turned to Neil Kinnock. 'How did we get this promise of one million jobs? Who worked on the programme? Promises such as these simply label us with targets we cannot achieve and expose our credibility'.That is good forthright stuff, and in a moment I will allow the hon. Gentleman to start spelling out his programme. The time has come for the hon. Gentleman to start trying to do something about the tattered credibility of the Labour party. I do not envy him his task in answering a Budget which is based on an excellent economic outlook and which contains extremely worthwhile tax changes and most significant and ambitious employment measures aimed in particular at the young and the long-term unemployed. Neither I nor most of the public believe that he can improve on it. I shall follow with care every word he says as he tries to prove that 1 million new jobs could be created by the proposals he and the shadow Chancellor have been putting out.
§ Mr. John Prescott (Kingston upon Hull, East)
The Paymaster General spoke for a long time, but not one extra job will come out of the policy about which he talked. It is caring capitalism, the people's capitalism offering tea and sympathy instead of jobs. The argument of my right hon. and hon. Friends is not against giving counsel and offering schemes to small businesses and big businesses. We want jobs from wherever they may come. We have no ideological obsession whether jobs come from the private or the public sector or about what advice we give. We fully support local authorities, particularly Labour authorities and the metropolitan county councils which are being abolished, which have done much to produce jobs by using both public and private money. Hon. Members should not be in any doubt about our endorsement of any economic activity which creates jobs.
In regard to the quotation made by the Paymaster General at the end of his speech, the fact that the Municipal Journal got the wrong title for me calls into question the accuracy of the report. I do not deny that I said it is not good enough simply to repeat a slogan about 1 million jobs and hope that people will believe it; we are obliged to spell out precisely where the jobs will come from and the consequential effects on inflation, on the balance of payments and on borrowing. We must face the facts straight. If we do not, the electorate will not believe us. We do not need lectures, such as the Paymaster General's speech, about what we should do.
439 Central Government have taken it upon themselves to say that the reduction in unemployment is a central feature of Labour party policy. In the first two years of a Labour Government we would look to local authorities to play a major part in the public expenditure role. But we cannot be indifferent to how local authorities spend the money if we want to get the maximum number of jobs. That is a central point for anyone who wishes to work with local authorities in achieving the objective of 1 million jobs.
We shall spell out in detail where the jobs will come from. Yesterday my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley), the shadow Chancellor, started to identify the areas in which jobs would be created. More work is being done on the policies. The programme will be published in detail within 12 months in time for the next election. The Government can tell us then why they will not spend money on those areas. It is not just Labour Members who say that the Government could use public expenditure to create jobs; many of the Paymaster General's hon. Friends have been saying that for some time.
When the right hon. and learned Gentleman was in the Tory Reform Group that is precisely what he used to say. I assume that he is still a member of that group, which gave the following advice to the Chancellor:We believe that any extra resources should be used to cut unemployment by spending on direct job creation through essential public investment and measures such as we discuss below.On the front of the document is the name of the Paymaster General.
§ Mr. Prescott
The right hon. and learned Gentleman may not be an author, but I notice that every one of the authors comes from the Conservative party research department. If the Paymaster General wants not to endorse the document, but just to sponsor it, then, to avoid embarrassment with his hon. Friends, he should withdraw his name from the endorsement of that policy. I shall give him the opportunity now to disown it.
§ Mr. Clarke
As the hon. Gentleman has just denounced the accuracy of the Municipal Journal and then repeated just about every word he was reported as having said, he should cease taking what appear to be good points from the hon. Member for Blackburn (Mr. Straw), who first discovered this pamphlet. If the hon. Gentleman looks at the front page, he will see a list of patrons of the Tory Reform Group, which includes the deputy Prime Minister and my right hon. Friend the Member for Worcester (Mr. Walker) and other people. It is plain that we are not the authors of the document. I am proud to be a patron of the Tory Reform Group, but I do not agree with each and every word that it publishes, nor does every other member of the group.
§ Mr. Prescott
The Paymaster General has earned his title as one who deals more in tea and sympathy than in hard, concrete facts about what he is prepared to do for jobs. I accept that he does not endorse the policy of using public expenditure as a way of creating employment. We accept that that is not his view, or the view of the Government.
When the Paymaster General talked about local authority enterprise and community schemes, he was asked about training schemes run by local authorities.
440 Local authorities are in doubt about maintaining good quality training under the youth training scheme because they are in difficulty through rate capping in financing schemes on a two-year basis. When the Government talk about local authorities using public expenditure to create jobs, they should remember that local authorities have been penalised by the loss of £16 billion of rate support grant, which in itself has created much unemployment.
On local authority financing we see in the Red Book that a further £2 billion burden is to be placed on ratepayers by the Government's financial proposals. That will undoubtedly cause further problems for local authority employment units and development bodies which have been creating jobs by using public and private capital, taking advice and introducing enterprise schemes.
I do not oppose business schemes, community schemes, YTS and counselling as a contribution to overcoming difficulties. My main charge against the Paymaster General is that he is misleading people because there is no prospect of his providing them with jobs. I accept that the long-term unemployed need advice and that they can get a good deal of help. I visit many jobcentres, job clubs, and so on, and talk to the people. I am (not embarrassed about admitting that. I welcome the help that is being given to the long-term unemployed, but the main question we ask is whether the Government can provide them with jobs.
§ Mr. Eric Forth (Mid-Worcestershire)
Given that we all share the hon. Gentleman's views on YTS and hope that local authorities will participate in it in future, may I ask the hon. Gentleman whether he agrees that the financial pressure on local authorities is often as much of their own making as of anyone else's? Does he agree that it would be more appropriate for local authorities to spend money on YTS rather than on nuclear-free zones or on give-away newspapers and propaganda? Does he agree that that would be a better priority?
§ Mr. Prescott
The hon. Gentleman is establishing a reputation for asking questions which are totally irrelevant to the point before the House. When local authorities have lost £16 billion from their rate support grant — a phenomenal amount of money—it is more relevant to point that out not just to Labour councils but to Tory councils, which have also been heavily penalised. We must remember that the loss of that money has affected training and employment. The Government are determined to pursue that policy, which is designed to create more unemployment, not jobs, although the Paymaster General says that he is concerned about job creation.
§ Mr. Kenneth Clarke
If the hon. Gentleman takes as long as I did to make a speech, it will be because he has given way as often as I did. He said a moment ago that he was not opposed to counselling and that he supported job clubs. Does he recall listening with me yesterday to the shadow Chancellor saying thatthe scheme for identifying the long-term unemployed and giving them counselling and help is not only deeply patronising to the long-term unemployed, but demonstrates a deep ignorance of the problem"?The hon. Gentleman described job clubs as places
where, as I understand it, young people come together and discuss why it is that they are out of work." — [Official Report, 19 March 1986; Vol. 94, c. 306–7.]Would the hon. Gentleman confirm that, 24 hours later, he refuted both those statements?
§ Mr. Prescott
The Paymaster General has a reputation for being considerably sharper than that small point shows. He was put into that job to give it a liberal face and to put sharpness into it. He is not doing very well at the moment.
My right hon. Friend the Member for Sparkbrook and I have discussed our experiences when we visited jobcentres. We do not enter into criticism without getting some assessment and feedback. The job club scheme implies counselling the unemployed on how to get a job because many do not know how to write or to present themselves properly. That is an insult to many unemployed, who have previously been unemployed under a Labour Government when unemployment was 1.2 million. Two million more of these workers were then in work. They do not need any advice on how to get a job. They just want to get a job. That is what my right hon. Friend was concerned about when he made that point.
This Budget debate shows the kind of different reactions that we have seen in the press. I was looking at some of the quotes and newspaper reactions to the Budget.
The Daily Mail says thatthe Chancellor made a tasty Budget out of the scraps.The Daily Express referred to aa Budget for a brave future.The Daily Telegraph said it was "ingenious". I do not read The Times and The Sun, and nor should anyone else. The intellectual paper, The Guardian—I rather like this quote—said:
All the basic problems that Mr. Lawson has inherited remain to haunt future administrations — appalling infrastructure, desperate housing conditions, low manufacturing investments, a withering technological base, a growing army of disenfranchised poor and unemployed. Yesterday's performance, for all its clever shifts and bright notions, did not even begin to address that grim and growing legacy.When the Chancellor was faced with that quote on the "Today" programme, he said that it was "typical Guardian rubbish", or words to that effect. It was pointed out that the Financial Times editorial was similar.
There are two different views about this Budget. This is the first time that any Government have clearly rejected the idea of doing anything about reducing mass unemployment. It is the first time that they have given any sign that unemployment is not an electoral liability. They feel that it is far better to operate on tax than on the level of unemployment, and they are morally indifferent as to what is going to be the level of unemployment at the next election. That is one heck of a kick in the teeth for the unemployed.
Another reaction is that it is clearly a money Budget. Anyone who has any doubt has only to see the reaction of Conservative Back Benchers. Whenever money was being doled out, there were cheers and the waving of Order Papers, and suggestions that we cheer. There was not one murmur when we whizzed through the special employment package. Nobody knew that it had been done. I almost shouted, "Where is the beef?"
There was then a press conference the next day for the three-pronged attack by Lord Young—that amateur in the other place — and the Paymaster General to announce their new approach to unemployment. It clearly is a money Budget. My right hon. Friend the Member for Sparkbrook pointed out that the rich will pay less, and the rest will pay more. It is true. That is precisely what came out of that Budget. He showed that a family on £5,000 a year gets 26 pence a week back. A family on £50,000 a year gets £3.30 a week back, which is even proportionately 442 higher in relation to the income that they earn. When one considers that those earning £50,000 a year actually have received £1 billion in tax since 1979, and are still getting it fed down their throats, that is highly offensive to the 3 million or 4 million unemployed. The money that was given in stamp duty and other capital transfer stamps is twice as much as the amount of money that Lord Young persuaded the Chancellor to give towards these tea and sympathy measures that the Paymaster General has been talking about.
I think the one condemnation of this Budget is that it seems that the Government are prepared to borrow. I did not see anyone protest when my right hon. Friend the Leader of the Opposition made the point that this Government have borrowed more than the Labour Government in their five years. We are actually borrowing to pay tax, but apparently it is evil to borrow to put people back into work. That is what this Budget is telling us. It is significant that this Budget does not mention anything about solving unemployment as an objective policy.
I looked back on some of the speeches that had been made in previous Budget debates, and I should like to remind the House of what was said. We have had six or seven years of this Government's policies, and we can now assume that they have had a chance to work in some form.
In the first Budget of March 1980 there were 1.3 million unemployed. The Chancellor at that time said:
These are realistic policies, to which there is no alternative."—[Official Report, 26 March 1980, Vol. 981, c. 1489.]By March 1981, and the next Budget, unemployment went up by 957,000 to 2.3 million. The Chancellor stated:
Unemployment may be slowing down."—[Official Report, 10 March 1981, Vol. 1000, c. 757.]Then in November 1981, we had the first fiddle which reduced the unemployment figures by 37,000. That made no difference. Unemployment, by the next Budget in March 1982, had gone up by nearly 500,000 to 2.8 million. The Chancellor then stated:
I have a Budget for industry, and so it is a Budget for jobs."—[Official Report, 9 March 1982: Vol. 19, c. 727.]We got the second fiddle in October 1982, which took a further 190,000 off the figures. By March 1983 unemployment went up by 351,000 to 3.1 million, and the Chancellor said:It is a Budget for recovery."—[Official Report, 15 March 1983; Vol. 39, c. 157.]By April 1983 we had entered into another further fiddle—160,000 taken off our unemployed figures.
By March 1984—the Budget that was known as the "Budget for jobs" — unemployment had fallen by 29,000. The curious thing about that was that the only time unemployment fell in this country was in the period between the end of one Parliament and the election of another, because the Government pumped a bit of money into the economy and told local authorities, "Go out and spend, quick." They said, "Spend on housing" — no problems with skilled labour.
We then had a new Chancellor, and he said that the Government would assist in the creation of jobs. Well, they got into creating in the "Budget for jobs," and we find in March 1985 that unemployment had gone up by 125,000. By February 1986 it had gone up another 114,000, and the Chancellor told us yesterday of a further substantial range of measures to help the unemployed. I do not think that those are many of the sort of things that the Paymaster General talked about, unless it is the tea and sympathy jobs—not jobs.
443 As Lord Young said in an interview last night, the purpose of these measures is to show that the Government have not forgotten the long-term unemployed. They have not; they have invited them for a cup of tea and a chat. But the long-term unemployed cannot get jobs. There are no jobs in any of these proposals. The only jobs in these proposals are the 2,000 jobcentre workers who are going to interview the unemployed, and I welcome that. At least it is an increase in jobs. It is also an increase in bureaucracy in the Civil Service, which this Government have spent an awful lot of time proudly reducing.
The record shows the latest little bit of a fiddle. The Paymaster General exclaimed with great indignation when we called it a fiddle, although he knows it to be a fiddle. When he adds the self-employed to these figures—a method that has not been used in Europe—by June he will be able to show that the percentage of unemployed, such as the figure of 14.1 per cent. in January, is reduced to something like 12.9 per cent. We shall see a remarkable turn around in the June figures due to the Government's fiddling—loading up the total amount of people in work and reducing the number of unemployed by using different calculations.
§ Mr. Kenneth Clarke
We made one change simply to correct an error, and I am pleased to hear that the hon. Gentleman is not attacking that. As to the rate of unemployment, does he agree that what we mean by that is a comparison between the number of those out of work and seeking work and the total numbers of the work force? Is he still on to the argument that the self-employed should not count as part of the work force? Does he not think that people working on their own account are in work?
§ Mr. Prescott
No, we cannot ignore the self-employed. However, this is the eighteenth change of the figures, and they are all designed to do one thing—reduce the figures of unemployed. The Paymaster General should stick with me and think it through. If he adds the self-employed to the total employed labour force and divides it by the same set of unemployed figures, he will get a different, reduced percentage.
§ Mr. Prescott
I am all for having accurate statistics, and I am not in doubt about them. When I was asked on television whether I would change the system, I said that I would look at the evidence and make a judgment. I can understand that the self-employed should be included. However, my judgment is that the Government spend all their time looking for ways to reduce the unemployed figures by fiddling them down.
Let us get a comparison with full-time equivalents, because the Government's only claim is based on part-time jobs, which form two thirds of the increase in jobs. The Bank of England and the Library have done the calculations with full-time figures. Unfortunately, when I asked the Paymaster General for an answer on this, he said that the Department could not deal with the problem because there was too much detail. If he has the statistics from the Library, why does he not get his computers working?
If the Paymaster General takes full-time equivalents now compared with 1979, which is a matter of record, he will find that full-time equivalents have gone down to about 2.1 million. The Bank of England looked at this 444 assessment and averaged what the increase in full-time equivalents has been, on that basis, from 1983 to 1985. The figure is about 24,000, as I think the Paymaster General is aware. That is about 12,000 a year on the balance of full-time equivalents. I asked the Library how long it would take us to reach the level of full-time equivalents of 1979 on the rate of increase that the Government have proudly put forward. The answer was 1,875 years.
§ Mr. Clarke
The hon. Gentleman cannot make his attacks on fiddling the figures and then start using an ingenuity that the hon. Member for Oldham, West (Mr. Meacher) would envy. Since 1983, the last election, over 700,000 people have gone into new employment. The hon. Gentleman is talking it all down, not least of all by leaving out all the self-employed again. There is a huge growth in self-employment, and the hon. Gentleman is betraying what I have already said is the prejudice of the Labour movement by leaving the self-employed out of the calculation.
§ Mr. Prescott
I am not ducking it, because I have not looked at it. The assessment made of the self-employed in the labour force surveys operates in a different way from when the Labour Administration were in power. If we asked that question, we should probably want to consider that possibility. I am not worried about that. However, if the Government want to compare their record on unemployment with that of the Labour Government, the records should at least be compared on the same basis so that we can get a fair judgment of where the Government's policies have been more successful. As I recall, the poster that the Government used in the 1979 election showed queues of people and said "Labour isn't working." Unemployment has gone up by 2.5 million since then, we have not heard a murmur from the Government, and the Budget is not doing anything to help.
The Government are also trying to manipulate the situation. They are trying to put a gloss on caring capitalism. Lord Young was appointed to his job to improve the image. We know how he does that. He gets out a calculator and fiddles the figures down, an then hires a PR agency for 1.5 million to tell us how daring the Government are and what they are doing to help the long-term unemployed. He is using the taxpayers' money for Tory propaganda about the Government's policy, which is what they do not want local authorities to do.
That is not acceptable, and the electorate are rumbling the Government. Why are we worried whether the figure is 3.2 million, 3.4 million, 4 million or 4.2 million? The reality is that the trend is inevitably up. The figure is expressed in millions of people unemployed.
§ Mr. Clarke
I do not think that the hon. Gentleman is on safe ground in asserting that the present trend in unemployment is up. He is drawing comparisions by going back to 1979. All our critics do that, but they take in the worst period of the recession, which was from 1979 to 1981. We have now had four or five years of sustained growth in the economy and we are rapidly creating new jobs. To go back to 1979 is to exaggerate the analogy. The hon. Gentleman cannot assert, on the basis of what I admit 445 are somewhat perplexing figures over the past few months, that we are on a rising trend of unemployment. He has no basis for asserting that.
§ Mr. Prescott
Does the Paymaster General spend any time looking at the figures? I can give him two from his Department. Unemployment in March 1984 was 3.1 million. Will he accept that proposition? They are figures from his Department, so I assure him that they come from a good source. In February 1986, the figure had gone up to 3.382 million. I am not a clever kid on figures, but that is an increase of nearly 250,000 people on the unemployment list.
Through the post I received a document from the Paymaster General's Department. It says at the top:Restricted to Ministers for Question Time.It is about the latest unemployment figures, and the Minister's civil servants have advised:Unemployment is 3.2 million. If asked, that is the smallest increase since November 1985.That is good propaganda, but it goes on to say:The total is the highest recorded since seasonally adjusted figures started in 1948.I did not hear that from the Dispatch Box in the last Employment Question Time. The document is full of good stuff which I shall use on other occasions.
Unemployment is higher now than it was in the 1930s, but in the 1930s it continued to go up for only four years at a run. I hope that the Minister will not deny those figures. In the 1980s, under this Government, unemployment figures have gone up every year for six years. My charge is not that the Government have made a mess of it, but that it is a deliberate act of the Government to maintain unemployment as part of their policy. There has never been any doubt about that. I shall not again weary the House with the figures for OECD countries and what happened under previous Tory and Labour Administrations, but the evidence is clear. It may be that people have been shaken out, as the Prime Minister suggested, but undoubtedly Government policy had a greater effect than any world recession on the nature of unemployment in the British economy. To that extent, the Budget, by giving money in tax cuts, confirmed that the Government were not prepared to give it for jobs.
We are always hearing arguments about how many jobs can be bought for £1 billion of borrowing. It is generally agreed that fewer jobs are obtained by taking 1p off tax than by putting the money into public infrastructure. Indeed—I am sure that the Minister will agree—more people can be taken off the unemployment register by producing cheapie schemes, such as the youth training scheme, community programmes, and so on. In fact, one of the conditions of going on those programmes is that a person is registered as unemployed. It is to get people off the unemployment register that those schemes are provided. What the Government chose to do in the Budget was to go for tax cuts and a lot of cheapie schemes, because that, basically, is what they boil down to.
I must make clear again my attitude to community programmes, YTS, and other such schemes. There is definitely a role for them in order to bring about a full employment economy. We are not going to produce 4 million jobs on a 40-hour week basis. Those days are gone. We have got to find all sorts of ways in which we can give the opportunity to all in our society to make a 446 useful contribution. Community programmes are clearly one such way, and they are here to stay, as is the YTS. My attacks on these programmes relate to the Government's using them simply to manipulate the unemployment figures and to avoid doing anything themselves about providing jobs.
The Minister says that he does not agree with the Tory reform package. I can only say that I wish that he had shown more consideration to the report of my hon. Friend the Member for Newham, North-East (Mr. Leighton). The Select Committee on Employment is made up of hon. Members from both sides of the House. That report was rubbished in a press release within an hour of its coming off the press. Any hon. Member who cares to refer to the evidence will see the following:We released it at 11 o'clock, we then had a Press conference at 12 o'clock and one of the journalists who came along at 12 o'clock had in his pocket what he called a Department of Employment Press release which pretty comprehensively savaged and denounced the whole report.That is the sort of attention that the Paymaster General gives to the serious attempt of hon. Members on both sides of the House to do something about unemployment.
My main objection to the Government's policy—this enterprise culture, this desire to give incentives and to vamp up profits—is that I believe it to have failed. The Government seem to believe that if people are given incentives and companies are given more profits, what the Chancellor calls the engine of growth will get going—the engine of capitalism, reinvestment and the provision of jobs.
If we look at the proportion of net domestic product that went to profits between 1979 and 1984 we find that it increased from 9.1 per cent. to 14.9 per cent.—a 6 per cent. increase, which is equivalent to £14 billion. What did they do with that £14 billion? They did not put it into investment. We have heard throughout these debates that investment has been lower in manufacturing.
When I was doing research for this speech, one thing that really struck me was something that the Prime Minister said when she was Leader of the Opposition. Talking about manufacturing industry, she said:On the economic side, we have to break through the prosperity barrier in manufacturing industry." — [Official Report, 28 March 1979; Vol. 965, c. 468.]The right hon. Lady not only broke through barriers, but she smashed down manufacturing industry, with investment, output and trade deficit all worse than in 1979.
When we look at what happened to the £14 billion, we see that it did not go into investment, training or research and development. As the previous Tory Prime Minister found out, despite all the incentives, money was not put into investment or jobs. It was put into property in New York, it was put into investment abroad, so that, as the Chancellor says, we can live in the future, when we have not got oil money, on all the money coming back from those investments. But it is at the cost of the collapse of our manufacturing industry and the loss of the jobs associated with it.
When I hear talk in this debate about training, I must say that industry has no room to criticise what the Government do about training. It was this Government who got rid of 16 of the 23 industrial training boards. It was this Government who got rid of the levies. The one thing that is claimed to be a success—YTS—is one of the industrial training boards that survived — the construction training board.
447 We are told from the Dispatch Box that we are short of all kinds of skills. Not only were the industrial training boards closed, but the Government closed the skillcentres, as the Minister said, because they deal with the traditional skills such as plastering, bricklaying, and other such jobs. That is what the Government have done about training.
When representatives of industry say that they are short of skilled workers, I ask them how much they take from their pockets to put towards training. They pay very little. It is scandalous how little they are doing about training. Most of industry is using the YTS to finance its apprenticeship programmes in the early stages; it does not even pay for its apprenticeship schemes.
I have an advertisement here which I find most insulting. It reads:Here comes Spikey Dodds. Watch out Japan.There is no doubt about what Japan does for its youngsters in education, making resources available, planning five-year training programmes and ensuring the acquisition of qualifications. Anybody who thinks that Spikey Dodds, after a two-year YTS scheme, is going to threaten Japan, Germany or America must be living in cloud-cuckoo-land. We are kidding ourselves if we believe that that is training for our youngsters, and we cannot maintain an industrialised economy without the skills necessary for a developed economy.
Even under the training boards we did not do enough training, but to dismantle them was criminal. The Government used the defence that with the training boards manpower got more places. Yes — they put the instructors on bikes to cycle round the factories. We do not do enough by way of training, and it is at the cost of our contribution to the industrialisation of the economy of this country. We see the kind of public relations stuff coming out from Saatchi and Saatchi. They do all right on it, but it is another example of tea and sympathy. It does not address itself to the real problem.
I therefore want to know where all the money went. A lot of it undoubtedly went abroad. That is the reason why we talk about a national investment bank. But an awful lot went in increased dividends, which went up 68 per cent. between 1981 and 1984 in real terms. In 1984 top salaries went up by 16 per cent. and incentives by 184 per cent. All this can be seen in the top salaries review. Real profits went up by 45 per cent. between 1981 and 1982 and real pay by 2 per cent.
Many of those top salaries and increased dividends go to people who work in the Confederation of British Industry, and we hear Sir Terence Beckett talking about nowt for nowt, as if somehow we are all being treated the same in the distribution of resources either by the tax handout by the Government or by the distribution of dividends and shares. People realise that they are treated differently. The richer one is, the richer one gets; the poorer one is, the poorer one gets. Poverty abounds and continues to increase in this country.
That is what really annoys me about the Government's policy. Most of these policies and schemes are designed to produce low-paid part-time jobs. If anybody has any doubt about that, it is only necessary to go into a jobcentre. I go into jobcentres all the time. I find jobs advertised that are illegal, and I take the cards off the board. I find jobs offered at 30 per cent. of the takings, which is illegal according to wage councils rates.
There is one distinct difference in the jobcentres compared with the time when the Labour party was in 448 office. There are fewer jobs but bigger cards. This is to make the jobs look more impressive. But the main jobs are community programme jobs. They are part-time, and, even with the increase in the rate which the Minister talked about, the rate in the community programme is not brought up to the real rate, which should be about £75 a week. It is still below the proper rate, and the people on these community programmes are going to be counselled to go into part-time low-paid jobs. The Government have an interest in that. It means that two people come off the dole queue instead of one. This is what the tea and sympathy and the counselling are all about. It is to get people into the community scheme jobs. That is what all these job subsidy schemes are for—to force down the wage rate and get people to work for less. The Government believe that this creates more jobs, but it only creates more part-time employment and leads to more self-employed.
I am not necessarily saying that those measures do not have a role to play, but more must be done. I can give the House a good example from my industry—shipping. I was a seaman for 10 years. I shall leave aside the question of paintings and bottles of wine. I am glad to hear that such abuses are to be stopped. Indeed, we said that that would happen. Capital finds a way of making its money. The Government say that they will extend the business expansion scheme to shipping. I am worried about shipping because we have lost about 700 ships since the Government came to power, and thousands of seamen have been thrown on the dole. The Government say that they will get shipping where it is cheapest, but with the Falkland islands campaign they went running around for ships.
I understand that the Government will encourage the BES for coastal shipping only. But the Secretary of State for Transport is dismantling cabotage—the only area in which Britain's shipping enjoys 60 per cent. of its United Kingdom cargoes. We have not yet done to our coastal trade what we have done to our deep sea fleets. The Government are stepping in with a charity scheme, while they are wholly dismantling all the jobs and the fleets in coastal shipping. But we are arguing against their proposals, relying as they do on the market system and on giving tea and sympathy. Many of the community programme schemes offer low pay, low skills, and few hours. Anyone can see through those schemes. It was hoped that 30 per cent. of the places would be full-time jobs, but the figure has dropped to 16 per cent. The Government's policy is to create part-time, low-paid, poverty jobs, and the MSC is their agent in doing that. That is why people resist MSC schemes and think that they are skivvy schemes.
It is not only the Labour party which talks about alternatives. I am sure that we shall hear much more about them. Indeed, we have heard about them before from the Conservative Benches, the Trades Union Congress, the Confederation of British Industry and the wets. They all say that public expenditue can be used to create more jobs, that local authority enterprise boards can be vamped and put in reverse to create more jobs.
My right hon. Friend the Member for Sparkbrook pointed out how 1 million jobs could come in two years. We have said how much that will cost, and the areas where they will come, but the Government criticise us for not having worked out how we shall find bricklayers and joiners. The Paymaster General made great play of housing. Obviously, we want to use the £6 billion in local 449 authority capital receipts from the sale of council houses. We know that 500,000 building workers are on the dole and that there is a need for houses. Is that not a sensible way to get people back to work? The Paymaster General is responsible for doing something about the unemployed, but he tells us that the skills are not available. He tells us that, having dismantled the skill training centres and the industrial training boards.
I wish to put a simple proposition to the Paymaster General. I think that the debate has been helpful to him to get to know the facts. In 1978–79, 280,000 houses were built, but in 1985 only 190,000 were built. Where did we get the skills so many years ago to run such a big building programme? Where did they go? The skills must still be there. They may have gone into the black economy. I have no doubt that there is a good deal of that going on in that industry. [Interruption.] I am adding the two together. I know that the Government do not like to do that. They talk only about the private sector. I shall let the Paymaster General into a secret. There is a brickie who works on both private and public houses, and his skills are needed for both.
If we had the skills for that programme in 1979, why do we not have them now? Of course we have them. They may be used in the black economy for a few bob in the pocket. We are looking at that aspect carefully. I would not mind financing a programme with those people. However, I had better leave it at that. People in the black economy are avoiding their obligations to pay national insurance and taxes, as they should and as they do on community programmes.
The Paymaster General does not need to worry or to rely on smears about a £25 billion programme. I see that the Chief Secretary has left the Chamber. My hon. Friend the Member for Thurrock (Dr. McDonald) challenged him last night. She said:The Chief Secretary claims that the Labour party proposes to spend £235 million on teachers,and £871 millon on building and equipment. The Chief Secretary admitted that that claim did not come from the Labour party, or even Labour party documents. The Chief Secretary replied:Could I say quite simply to the hon. Lady that I am happy indeed to get the record right … I want to establish … precisely what pledges the Opposition are putting forward. I shall be very happy to tick them off from the £24 billion." — [Official Report, 19 March 1986: Vol. 94, c. 374.]The right hon. Gentleman accepted that they were not Labour party figures. It was a big slur by the Government, and propaganda about a programme which was not part of Labour's policy.
§ Mr. Kenneth Clarke
The hon. Gentleman stopped that quote at a convenient point. My right hon. Friend the Chief Secretary said that he would be happy to tick the pledges off, and that if the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), who was in the Chamber,would like to write to me telling me what pledges I have got wrong, I will do the costing accurately."—[Official Report, 19 March 1986; Vol. 94, c. 374.]We have costed the Labour party programme at that figure, and we are waiting for the right hon. Member for Sparkbrook, or someone, to write to us saying on which 450 promises the Labour party will renege to get its present public spending commitments down to the figure that it is now talking about.
§ Mr. Prescott
Even if the logic is correct, why did the Government not write and ask in the first place? If the Government were concerned, all they had to do was ask.
The Minister's answer makes the position clear. He is new to the job of Employment spokesman. He was brought in with a new image. I accept that Lord Young has a completely different style. He not only fiddles the figures, but fiddles television and radio interviews to ensure that he does not appear to defend his policies. He is gutless and has no courage to defend his policies, so we must make do with the number two—the Paymaster General.
The Budget is an offence and a kick in the teeth to the unemployed. All it is offering is more tea and sympathy in various sorts of schemes designed to reduce wage levels, and to create more part-time work to fiddle the employment figures. There is an alternative and Labour is presenting it. The issue of getting people back to work will be proven with the return of a Labour Government.
§ Mr. Peter Rees (Dover)
The hon. Member for Kingston upon Hull, East (Mr. Prescott) has made a long and vigorous speech. I hope that he will not think me discourteous if I do not follow every point that he made because many of them did not appear to relate closely to the Budget. They may be more appropriate in a more general debate on employment, or on a debate about merchant shipping, about which he knows I am concerned.
I rather warmed to the hon. Gentleman when he opened his speech by saying with becoming candour that he would produce clear, precise and carefully-costed proposals for reducing unemployment and dealing with that problem. Despite the 55 minutes that elapsed, I still remain—this may be a reflection on my capacity for absorbing his oratory — entirely unclear about the Labour party's precise proposals.
I heard and read with care the words of the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), and saw his proposals. I did not notice whether they were endorsed by the hon. Gentleman. Perhaps he was wise not to. Or does the hon. Gentleman endorse them?
§ Mr. Rees
The hon. Gentleman does endorse them. The proposals amount to £1 billion on infrastructure for capital programmes, and an increase in public-sector employment, costing a further £1 billion. I commend the right hon. Gentleman for his modesty and self-restraint. He then went on, perhaps a little less modestly and with a little less self-restraint, to endorse completely, perhaps not entirely understanding the figures, the recommendations of the all-party Select Committee. That would take him up into the £8 billion region.
I sense a certain unease on the Opposition Benches about the levels of public expenditure to which they may or may not have committed themselves. I noted the uncharacteristically sharp words of the hon. Member for Thurrock (Dr. McDonald), who is beating a retreat at this moment, and who promises my right hon. Friend the Chief Secretary hard times in Committee.
We in the House and people outside are entitled to have carefully costed proposals from the Labour party. It may 451 be that the Labour party is resiling rapidly from the figure of £24 billion, but I will not go into the details of that. [Interruption.] I have a warm regard for the contributions from the hon. Member for Sedgefield (Mr. Blair) with whom I had delightful and often constructive debates last year in Standing Committee. Perhaps in due course he will throw a little bit of light on these matters. I know that the temptation in opposition is always to commit oneself to a little bit more than one can fulfil, but the country and the House are entitled to know in more detail what the proposals are, what they will cost, and how they will be funded.
I should like now to turn to what should be the subject matter of the debate, the Budget proposals. The hon. Member for Kingston upon Hull, East made a vigorous and voluminous speech, but my confidence in his grasp of the Budget proposals was a little shaken when I heard him say that the stamp duty reductions would be more than the figure devoted to employment measures. Let us look at both. The stamp duty reductions in the year 1986–87 are self cancelling. Page four of the Red Book says that there will be a reduction in the rate which will cost £70 million and there will be an extension of the base which will yield £70 million.
The changes in capital transfer tax, or, as we must now call it, the inheritance tax, will involve a remission of tax of £35 million. If the hon. Gentleman had cast his eye a little bit further down he would have seen that the total gross expenditure on employment measures will cost £195 million. The hon. Gentleman has possibly not done his homework in this field with quite the assiduity that he showed in other areas. If there is tea and sympathy on the Government side of the House, there is a great deal of tea and great deal of sloganising on the Opposition side, but not many practical measures.
I should now like to look at some of the measures which my right hon. Friend the Chancellor so wisely commended to the House. I congratulate the Chancellor because he constructed some rather attractive bricks with only a little straw. I am sure the House understands the constraints under which he was operating. The right hon. Member for Sparkbrook said that, notwithstanding the constraints, there was an opportunity for a great economic breakout. Alas, his suggestions gave me the impression that he had not the remotest idea of how to achieve an economic breakout.
I hope there is common ground on the fact that the lowering of oil prices, if maintained, should feed through over the years to assist in creating a yet more buoyant and vigorous industry and should yield increasing amounts of corporation tax to the Exchequer. It was an irony, and perhaps a difficulty, for my right hon. Friend the Chancellor that concurrently with the Budget speech there was an important OPEC meeting, the conclusion of which is perhaps a little bit difficult to divine at the present time. The lowering of oil prices should assist in reducing further the rate of inflation. My right hon. Friend was right to defer the major reforms upon which all my hon. and right hon. Friends have set their hearts.
§ Mr. Nicholas Budgen (Wolverhampton, South-West)
Will my right hon. and learned Friend explain why the lowering of oil prices will necessarily reduce the rate of inflation? It will reduce some costs, but if inflation comes from an increase in the money supply, will the reduction not be balanced by increases in other costs?
§ Mr. Rees
I do not take such a theoretical view as my hon. Friend. Fuel and energy costs bulk large not only in domestic but also in industrial budgets, and I hope that they will be reflected in the figures I have cited. The right hon. Member for Sparkbrook talked about the "essential triviality" of my right hon. Friend's Budget. Has he really grasped the philosophic thrust that has characterised not only this Budget but other Conservative Budgets? It is right for my right hon. Friend and his predecessor to take credit for perhaps the longest period of sustained growth over the past 10 or even 20 years, and that has been coupled with a steady downward trend in inflation. That emphasises the underlying soundness of the economy and of Government financial policy.
It cannot be the enfeebled economy that the Opposition would have us believe it is. We have time to survive the miners' strike and the uncertainties of the oil market. Casting my mind forward to the future, I hope that against this background my right hon. Friend will share his thinking with the House about when it would be appropriate for us to join the exchange rate mechanism of the European monetary system. This may not be the appropriate moment or the appropriate debate in which to ask about that.
§ Mr. Rees
I think that my hon. Friend has reached the same conclusion as I have. This is a decision that we cannot shirk for ever. I will be persuaded by the able advocacy of my right hon. Friend when he winds up on Monday or by the advocacy of my hon. Friend the Economic Secretary when he winds up tonight. I leave them diffidently with the thought that perhaps the time will come—if not this week or this month then perhaps this summer—for some movement on this delicate front. I am sure that the advantages of such a movement are clear to the House.
I should like to revert to more immediate concerns. It was made clear by my right hon. Friend the Chancellor that the essential theme of the Budget and the long-term theme of the Conservative party is the encouragement of a property owning democracy. We have moved a little further away from the cry of three acres and a cow. It is now a house, a transportable pension scheme and, it is hoped, a modest stake in the equity market. That is the background of this Budget. We could have a significant debate on the philosophic divide between hon. Members on the Government side and hon. Members in the Opposition. I hope that hon. Gentlemen who feel able to contribute to such a debate will explain to us their real objections to the Budget and will not repeat the prejudices which I am sure the hon. Member for Sedgefield does not share. Perhaps he could explain the objections of thinking members of his party.
I used to think that the Labour party would like us all to be tenants of local authorities and employees of the state and, ultimately, pensioners of the state. I am sure I have misconstrued its thinking, but we are left a little bit in the dark. We are reminded constantly by the Opposition that we are possibly within a year or a year and a half, and certainly not more than two years, of a general election. The Labour party owes us its thinking on that and on other subjects. I hope I shall be forgiven for dealing in generalities, but our policies will create not only social and 453 industrial stability, but will generate and sustain the increased economic activity which alone can create sound and long lasting jobs.
If one looks at the speech by the right hon. Member for Sparkbrook, one sees that it is once again a question of padding the public sector payroll. The thinking of the hon. Member for Kingston upon Hull, East, who has abandoned the House—I have no doubt for good reasons—was to treat the local authorities as the engines for creating employment. The clear inference was that the payroll of the local authorities should be padded. Is that a constructive suggestion in the second half of the 20th century?
I now come to the measures which I find especially attractive and skilful in the Budget. Bearing in mind the limited resources that my right hon. Friend had to deploy, I commend the business expansion scheme and its permanent extension. I had something to do with its early initiation and I recognise that it needed to be refined and improved. I am sure that my hon. and right hon. Friends will be open minded in considering whether it needs to be expanded as well as redefined. The principle has now been accepted and the scheme is recognised as a useful and appropriate way of mobilising capital for developing businesses. That is a healthy development.
I well understand the pressure on my Treasury colleagues, and why the profit sharing proposals could not be deployed now. However, I await them, as they are developed, in keen anticipation. Over the years we have had share incentive schemes. I know that the alliance is particularly attracted to such schemes, and I hope that it will find common ground with the Government in approving of profit sharing proposals. No doubt the Labour party, with its hard-line approach to such matters, will attempt to rubbish them, but all moderate and thinking people will recognise the advantages to be derived from some new thinking in this area.
I turn to the personal equity plan, I have always nourished some interest in the Loi Monory. Of course, it will not be reproduced exactly in a British context; indeed, we know that circumstances in France were slightly different. Nevertheless, I welcome the Loi Lawson. I certainly do not underestimate the contribution that it can make.
I have no reservation about the part played by pension funds and insurance companies in our social and economic life. But it is important to encourage people to hold a direct personal stake in the shares of British companies. Buying shares, for example, in companies that are household names will lead people to understand their position, and the real economic prospects. Such an understanding has been lacking until now.
I shall now consider the provisions relating to capital transfer tax. I remember the sharp debates that we had over the winter Finance Bill introduced by the last Labour Administration. I always thought that it was an ill-judged price to pay for the support of the extreme Left wing of the Labour party for other measures that had to be carried through. But that is an abiding feature of Labour Governments. They have to pay a price to their Left wing. In those days, the Treasury Bench, if pressed, would probably have said that it was of limited concern to it whether or not there was an extension of capital transfer tax, but that such and such had to be done to satisfy the 454 —to coin a phrase from the then Chancellor of the Exchequer—"tiny Chinese minds" of the Left wing of the Labour party.
We rightly committed ourselves to drawing the teeth of capital transfer tax, and I believe that we have fully honoured that commitment. The right hon. Member for Glasgow, Hillhead (Mr. Jenkins) made a characteristically elegant contribution yesterday. I was rather charmed by his military metaphors, as I had not heard them from his lips before. However, in his absence, I should like to commend him on that new turn in his eloquence. The right hon. Gentleman suggested that we should try to establish a stable regime. I believe that stability can be achieved using the measures that the Government have in mind. There are always points of significant detail to consider, and we may have to consider rates from time to time, but we now have a structure which will not always be attractive to those families who will have to meet this impost but which could provide us with some common ground. I hope that the alliance will confirm my feelings on that point.
We were right to give priority to tax thresholds during the past few years. Moreover, I warm to the statement of my right hon. Friend the Chief Secretary that there is room to advance on both fronts. It must be recognised that the starting point for income tax, coupled with national insurance payments, is now as high as, if not higher than, that in any other country in western Europe. Indeed, as my right hon. Friend so appropriately and gracefully emphasised yesterday, we should consider the middle band of taxpayers and reflect on how far their position has been advanced over the years. We should contemplate whether a little more could be done for them.
At the risk of striking a rather heterodox pose and perhaps disavowing some of the things that I have said in the past, I should point out that the time may come, particularly when the Inland Revenue has computerised its activities, to consider returning to a variety of intermediate rate bands. I fully realise the breathtaking nature of that proposal. I have argued vigorously against a single intermediate rate band because it concentrates the advantages too narrowly. However, I am no longer in a position to master the technicalities of my proposal, and am not even in a position to cost it. I recognise that it might be rather expensive, but I hope that my right hon. and hon. Friends will give it some thought.
It is appropriate to point out that so far no Opposition Front-Bench spokesman has made any reference to the staggering and imaginative reliefs that have been devised for charities not only in this Budget but in previous ones. I have read all the speeches of Opposition spokesmen, although I hope that I have not read them too fast. Indeed, we have not even had tea and sympathy for charities from the hon. Member for Kingston upon Hull, East. That tells us a little about the Opposition's approach to hardship and poverty. It is an institutionalised Socialist approach. I see that the hon. Member for Kingston upon Hull, East is stirring uneasily and I hope that he will give the lie to that.
§ Mr. Rees
I am delighted to hear that, and I am willing to withdraw my remarks. I candidly admit that I did not take the speech of the Leader of the Opposition seriously enough, and I shall make an exception in the case of the 455 right hon. Gentleman. However, I shall give way if the hon. Member for Kingston upon Hull, East wishes to intervene in response to my remarks.
We have had an imaginative Budget. We shall, of course, look for more substantial moves next year, but this Budget can be taken as an earnest of things to come. More importantly, it demonstrates the continuing vitality and original thinking of both the Treasury and the Government. One is bound to contrast that with the thinking of the Labour party, with its muddle over its public expenditure plans, which is perhaps symptomatic of the difficulties that it finds itself in. The rather harsh exchanges that were heard between my right hon. Friend the Chief Secretary and Opposition Members show that the Opposition are a little uneasy about the paucity of careful thought on their Benches. But we would like to know what their public expenditure plans are, and what programmes they would boost and what programmes they would trim.
§ Mr. Rees
Well, we have been waiting a very long time. The Labour party has been in opposition since 1979, and there may be another general election sooner rather than later. The Labour party owes it to the country to spell out in detail—[Interruption.] The hon. Member for Kingston upon Hull, East may have spoken about it, but then his speech was bereft of any thinking on this subject.
At present the right hon. Member for Sparkbrook has said only that all the higher rate reliefs would be clawed back and that there would be an investment income surcharge. He put the simple proposition that the higher earners had been uniquely benefited. I remind him and the hon. Member for Kingston upon Hull, East that they were uniquely disadvantaged during the years of Labour rule. It cannot be a maxim that this country's unity must be bought by income tax rates of 98 and 83 per cent.
We have been told that this is a divisive Budget. I have heard nothing from the Opposition Benches to suggest that their fiscal plans will achieve harmony, let alone any economic vitality. The Opposition's fiscal plan is a step back to the 1970s and the sterile slogans of class warfare which are utterly irrelevant to the latter part of the 20th century and which have been decisively rejected at the last two general elections.
The electorate will recognise where there has been constructive and imaginative thinking. It will recognise this Budget as evidence of that thinking, and I shall support my right hon. Friend the Chancellor of the Exchequer's Budget proposals with real pleasure in the Division Lobby on Monday.
§ 6.1 pm
§ Mr. Ian Wrigglesworth (Stockton, South)
I am pleased to follow the right hon. and learned Member for Dover (Mr. Rees) because I would like to begin my speech by covering those points of the Budget where I am happy to agree with the Government's actions and to say that, in some respects, we shall be pleased to support the Government on those proposals in the Finance Bill and in later stages.
Not all the points relate to the Finance Bill but I will mention some points that are important. First, there has been a substantial change in the Government's attitude towards the international and national finance markets. The reason why the right hon. Member for Birmingham, 456 Sparkbrook (Mr. Hattersley) got it wrong about interest rates the other week when he forecast that they would rise—
§ Mr. Wrigglesworth
No, we did not make that forecast. In fact, we made the opposite forecast because some alliance hon. Members were aware of what was happening in the City at that time. What happened then was something which should have happened previously and which I am pleased that the Government have done. They have intervened through the Bank of England in the financial markets in order to steer interest rates in a way that they were not prepared to do previously.
In his Budget speech, the Chancellor paid some compliments to the efforts made by the United States Administration—by the Secretary of State and the chairman of the Federal Reserve bank—through their intervention in world markets and by way of the Plaza agreement. That agreement has benefited this country and the whole international financial system. I welcome the change of view that intervention by Governments in these markets is beneficial and I hope that the Government will continue to pursue that policy.
I am pleased also to welcome the Government's announced intention to examine the possibility of giving tax relief for profit sharing and I join the right hon. and learned Member for Dover on that point. The House will not be surprised to hear that the alliance has some pride of authorship in supporting that suggestion. The suggestion is only tentative at this stage but, like the right hon. and learned Gentleman, we shall follow with great interest what the Government are doing and if they can come up with a scheme that will help to encourage profit-sharing to become a much greater part of the remuneration of staff at all levels in enterprises, we shall in principle give that scheme our support.
Similarly, we support in principle the Government's proposals for tax relief and other benefits for people buying shares for the personal equity plan. However, having looked at some of the details, I am not as impressed with the scheme as I was by its original principle. I fear that the benefits that are offered and the scale of the scheme are very limited and I do not think that it will be Loi Lawson. The scheme has a lot further to go before it achieves what France and other countries have done to encourage people to buy a substantial number of shares. It has our support in principle, but in practice we will have to study the details in the Finance Bill before we decide our attitude on the matter.
I am pleased to support the Government's proposals on charities, which are comprehensive, both for the expenditure made by charities and the contributions made to them. The proposals will be widely welcomed inside and outside the House.
I also welcome the publication of the Green Paper on the reform of personal taxation. The proposals to separate the taxation of man and wife are welcome. I have made similar proposals in previous Finance Bills and this idea has had increasing support across the political spectrum. However, I do not think that the alliance will be able to support the proposals for the transferability of allowances contained in the Green Paper. Obviously a great deal more study must take place before we can strike our attitudes on 457 the detailed proposals. However, it is good to have the proposals in their present form, as they allow public debate to take place before the computerisation of the revenue takes place in 1990 and we can all come up with proposals for consideration.
I would like to make the following appeal to the Government. I hope that they will consider in a way that they were regrettably not prepared to consider in relation to pensions the possibilities of seeking some agreement between the parties on the direction and shape of the proposed taxation system. There are some areas on that issue where we might be able to get agreement across the Floor of the House. It may benefit the Revenue, the Government and, most importantly, the country if we can have some stability in the organisation of the tax system rather than having constant changes with changes of Government. I would suggest that the Government have consultations across the parties to see whether a measure of agreement can be reached on the proposals.
Those are the areas of the Budget for which I commend the Government. However, my commendations must end on the shape of the Budget strategy. The Chancellor's sums depend on a very rosy view of international and national activity in the economy over the forthcoming year. His projection of a 5.5 per cent. growth in world trade compared with 3 per cent. this year generated by falling oil prices may be correct. Whether British exporters can share in that expansion depends crucially upon the effects of unit labour costs and whether those costs will undermine the possibility of firms taking up some of the demand from overseas that will undoubtedly come as a result of the fall in the price of oil.
The Chancellor's PSBR and other targets crucially depend on how much progress we can make in the direction of unit labour costs. The Chancellor has not paid sufficient attention to the impact in the longer term that the fall in the price of oil and the rise in unit labour costs will have on our balance of payments. Our current account will very soon come under increasing pressure as the revenues from the sale of oil overseas decline and as our unit labour costs make industry less competitive. In future, that will be a major constraint on the economy for any Government to face. I would like the Minister to pay attention to the forecasts and respond to that clear threat for the future.
The principal criticism that I and my colleagues make of this Budget is that its priorities are wrong. The expenditure upon which the Chancellor has embarked as a result of his fiscal adjustment—the cut in taxes—is the wrong thing to do at present. The Budget has done nothing to use the Chancellor's fiscal freedom to encourage and increase jobs in the most cost-effective way and it has done very little to help the competitiveness of British industry.
There has been a great debate, which we have witnessed again today, about the costing of the Labour party's proposals. I would like to say a few words about public expenditure as I think that the Government's actions have been valuable in exposing the hollow nature of the Labour party's proposals and in drawing attention to the grave problems of public expenditure which this Government and any Opposition party with any sense would recognise are constantly being faced today, in this country and elsewhere.
458 Not many people acknowledge that public expenditure has increased under the Government. The financial deficit shows an increase to £12.2 billion. There have been substantial increases in public expenditure in some programmes. They are not the programmes that I and my colleagues would like to see expanded. The defence budget has been massively increased, as indeed has the employment benefit and social security benefit programmes. They have been one of the major reasons why public expenditure has increased.
But any Government today will have major problems in containing the growth of public expenditure. The Government's analysis of Labour's promises has drawn attention to the way in which parties in opposition can too easily make great promises to all sorts of pressure groups and end up in the position of the Labour party. We recognised that a long time ago and I hope that the Economic Secretary will accept that. We did not just pull figures out of the sky in the way that the Labour party has. We sought, as well as we could, to test our budget proposals not only on one economic model but on two. There are grave problems for any Opposition party doing that without the resources of all the Government Departments behind it. We published all the figures and consequences of that and decided upon the public sector borrowing requirement that we were prepared to accept could be borne.
I hope that the Minister will acknowledge that we were making a serious attempt to put forward a credible policy. Certainly that has been widely acknowledged in parts of the press that are not sympathetic to our cause and in other areas of the public press. We have clearly stated the consequences of our programmes for inflation, the PSBR, the exchange rate and interest rates in forthcoming years.
We have heard a lot of figures from the Labour Front Bench about what the Labour party will spend on this and that. But we have heard little about what the interest rate, the exchange rate or the PSBR will be in two years' time under Labour's programme. In fact, we have heard nothing at all.
The right hon. and learned Member for Dover and the Minister cannot have heard the right hon. Member for Sparkbrook on the radio this morning. I almost had a crash listening to him in my car on the "Jimmy Young" programme. The £3.5 billion that he has gladly given out to the pensioners, the long-term unemployed and all the others who have been promised great increases in benefit he took away this morning. We were told that that money would come from the top 5 per cent.—those who earn £25,000 and more. But this morning the right hon. Gentleman said when pressed that he had always felt that people who earned about £25,000 had been taxed much too heavily and that he had nothing against people earning £25,000 and above. He then went on to say that there would be no increase in income tax for those people. Where he thinks he will get £3.5 billion from to increase pensions and all the other benefits if he does not increase income tax on people earning above £25,000, I do not know. He will certainly not get that money from increases in capital taxes on those people and the others that he is proposing. The bulk of that £3.5 billion could come only from restoring the levels of taxation—which he then went on to condemn—that had been levied in the past upon such highly paid people.
That is typical of what we have heard month in and month out from Labour spokesmen. They have taken 459 figures out of the air which, when added up, are meaningless. It is nothing more than a public relations exercise. It is irresponsible opposition. The Opposition are not prepared to test their figures on the London Business School computer, on the Treasury computer, on the National Institute economic model or anywhere else. We are told that we shall have the figures in a year's time but I bet that that deadline will slip because the Opposition are caught between the Left in their party, who want them to spend the money, and the figures—the consequences of the programme that they are putting forward. They cannot reconcile those two forces. That is why we shall never have any serious proposals from them.
I acknowledge that containing public expenditure is a major problem for any Administration. The Government have demonstrated the truth of that by the difficulties that they have had in reining back public expenditure, about which they have been enthusiastic. My right hon. Friend the Member for Glasgow, Hillhead (Mr. Jenkins) pointed to that fact yesterday. Unless we are able to increase the competitiveness of British industry and to increase Britain's wealth we shall not be able to increase public expenditure in the way that all the pressure groups and I and my colleagues in the alliance want to do in the future. As the revenues from oil decline and as the contribution to the balance of payments from oil declines, it is crucial that manufacturing industry should be efficient and beat the competition from West Germany, Japan, America and other countries.
The only way in which we can improve the efficiency of manufacturing industry is by having a long-term plan. We put proposals in our budget statement for that for improved education and training and for cutting the employers' national insurance contribution. I shall not go through all the proposals that we made, but they hang together to get people back to work and to increase the competitiveness of British industry in order to increase the size of the cake from which to pay for social services, the Health Service and all the other things. That is vital and that is why our major criticism of the Budget is that the £1 billion or thereabouts that the Chancellor had available has been given away in a cut in income tax of 1p. That will do virtually nothing to get people back to work. A reasonable estimate is that it will create about 30,000 jobs over two years. It will do virtually nothing to help the competitiveness of British industry. If that money had been spent on research and development, which the Chancellor mentioned, industry would not have been on its own. All he was able to say was that the private sector will be allowed to increase its profits. Yes, it must have profits, and substantial profits, to reinvest, but cannot the Chancellor seek to direct that investment and to help industry by using the substantial amount of money that he has given to those who are in work to help industry and so to get some people off the dole queue, using that capacity to create the wealth that we need for the social services and the other things that we all want to see?
§ Mr. William Cash (Stafford)
I am listening carefully to what the hon. Gentleman is saying. Surely the way in which we shall be able to compete successfully in world markets is by producing higher quality goods. I hope that he will give us some idea of how he will put forward policies which will enable us to produce goods of a quality and kind which will compete successfully in world markets.
§ Mr. Wrigglesworth
We shall have to spend a great deal more on research and development in industry. We shall have to spend a great deal more on obtaining a highly skilled, highly educated work force that is innovative and can produce the best in design and one that has all the talents to create that wealth. We must not do what the Government have done much too much of—trying to have a low-paid, low-skill economy. That may be all right for developing countries, where there is cheap labour that can be used to undercut in many mass production industries. But, indeed, even in that sphere there is no future.
Although I am pointing out the importance of manufacturing industry, we shall not go back, as some Labour Members seem to think, to the position where tens of thousands of people are employed in factory after factory with smoke rising from the chimneys in the regions and other parts of Britain. We shall have a decreasing number of people working in manufacturing industry.
Manufacturing industry must remain productive and be the most effective means of creating wealth in the economy, upon which the service industries can be based. The City of London and many of our service industries, among the best in the world, would not exist were it not for the great manufacturing and trading power of our country in the past.
The manufacturing base was eroded dramatically during the period 1979 to 1981. The Government made many wrong decisions. We had a high exchange rate, high interest rates and manufacturing industry and other sectors were undermined by economic circumstances. It was not that they were inefficient but rather that they were undermined by such circumstances. At the same time there was the Clegg report and VAT was increased from 8 per cent. to 15 per cent.
§ The Economic Secretary to the Treasury (Mr. Ian Stewart)
The hon. Gentleman has accused the Government of making wrong decisions. Is he saying that the cut in the basic rate of income tax by 1p to 29p is a wrong decision? Is he opposed to that?
§ Mr. Wrigglesworth
I am absolutely opposed to it. It is the wrong priority at this time. In the future I would love to see a 25p rate of income tax. A rate of income tax of 25p on a much bigger base in a wealthier country would raise more revenue than the rate of 30p or the proposed 29p. A rate of 25p is a marvellous aim. We will not achieve that unless we invest in the things we advocated in our budget proposals and our autumn statement.
There is consensus — it unfortunately does not encompass the Treasury Benches—among many right hon. and hon. Members on Conservative and Labour Benches. This consensus is shared by the British Institute of Management, the CBI, management in industry and the trade unions. It is most regrettable that the Government will not recognise this consensus and act upon it.
My right hon. Friend the Member for Plymouth, Devonport (Dr. Owen) has said before—so it will come as no surprise to hon. Members to hear it again—that many of the policies that the Government have implemented with regard to industrial relations over the past few years have been enormously beneficial. The increased productivity that has been achieved in the steel, mining and other industries is largely a result of the firm 461 steps that the management and the Government have taken. It is right to acknowledge and welcome those achievements. However, much more needs to be done.
Where should that money go and what should we do with that money? The Paymaster General criticises us for wanting to spend some of the money on the community programme. I am sorry that he made that criticism. The community programme has made a great contribution to helping people who are suffering unemployment, as it has provided work for a substantial number of people. It is an immediate and cost-effective way of getting people back to work. That is why we suggested that the ceiling should be doubled and that more money should be directed to the programme. The programme is effective, both in terms of time and in terms of cost, in providing worthwhile jobs. We have also suggested a 10 per cent. cut in each of the bands of employers' national insurance contributions. That would help to make industry more confident—it would be able to increase its sales in overseas markets, increase profits and therefore invest more. The national insurance contribution is a tax on jobs. A cut of 10 per cent. in national insurance contributions—not the 1 per cent that we previously advocated and that is now advocated by the Labour party—would encourage firms to take on more labour. There is considerable evidence to substantiate that a percentage cut on each band would be a most effective way of achieving it. It would encourage firms to take on more highly skilled labour as well as benefiting people in the lower rate bands.
We would like to see more help given to the long-term unemployed. There is a high level of unemployment and something should be done immediately. The long-term unemployed should be on a long-term rate of supplementary benefit and family support and child benefit should be increased. Help should also be given to pensioners who are being hit hard by the current economic circumstances. We would also want to see a programme for skills.
As part of the mix of expenditure which we would like to see the Government embark upon, £2 billion should be spent on what is loosely called the infrastructure. The Paymaster General did a great disservice to the House by giving the impression that we are simply proposing highly capital-intensive investment. All we have said in our budget proposals is that it should include:
tackling the major backlog of housing repairs and maintenance, and building and renovating houses to meet the substantial requirement for accommodation, renewing out-dated NHS hospitals; rebuilding dilapidated sewers and undertaking essential road construction schemes and repairs.There is a tremendous amount of work in the public sector that needs to be done. Such work would not damage our current account because it is not import-intensive. It uses indigenous materials. Such work is labour-intensive. We have concentrated on house repairs, insulation and renovation. This work and the new start programmes are the most labour-intensive. We believe that mix of proposals would be the best way to help in the long term those who have been hardest hit in the shortterm.
I join with the right hon. and learned Member for Dover in regretting that the Chancellor had nothing to say about joining the exchange rate mechanism of the European monetary system. We have advocated this, not in a blind desire to go headlong into Europe, as some of our opponents have tried to suggest, but in the belief that this 462 system would sustain confidence. It would provide discipline, would give greater stability, and would take out some of the peaks and troughs both in the interest rates and the exchange rates. It would be beneficial to British industry and to the community as a whole.
If we were to join the exchange rate mechanism it would allow the European monetary system to develop into a much more effective force within the international financial system. Britain's half-in, half-out position is preventing the development of the system. For these reasons I hope that, one weekend, the Chancellor—or perhaps the Prime Minister is the right person—will decide to join the exchange rate mechanism and on the following Monday an announcement to that effect will be made. Bearing in mind our present exchange rate with the basket of currencies, the position of the deutschmark and dollar, this is the most appropriate time for negotiations to take place. I hope that the Government will do something about it.
I come now to unit labour costs. In the last quarter of 1985 unit wage costs in the United Kingdom increased by 5 per cent. In Japan and West Germany there was a nil increase and in the United States they increased by 2 per cent. In recent years, unit labour costs in Britain have continued to increase consistently compared with the costs of our major competitors. That must stop. Unless it does, we shall not be able to compete with our major competitors, especially in West Germany, Japan and the United States, and the comparative decline in Britain will continue.
We must make tough decisions and face up to difficult circumstances if we are to stop that decline. The Government must be prepared to intervene, not only in the level of interest rates, as they are now rightly doing, but by having a pay strategy. Exhortations from the Dispatch Box and criticisms at CBI dinners of what is happening are not enough.
I hope that one of the proposals we advocated in our statement on the Budget and which the Government appear to have taken up will be developed—the proposal to give tax relief on profit sharing. We have advocated tax relief because there has been justifiable criticism of the old-style pay policies, which have sought to penalise firms and people for increasing pay levels above the norm. We have advocated that firms should enter into longer-term pay contracts, initially for two years and perhaps later for three years, instead of an annual pay round, and that firms should encompass within those contracts a much greater share of the profits. We have proposed giving financial benefits to firms that conclude such agreements.
I hope that the Government will be persuaded to move in that direction. We believe that that measure should be tried and that it could provide the key to moderating the type of pay settlements made recently which have been undermining our competitiveness, increasing our unit labour costs and thereby ensuring that unemployment is not reduced.
We are opposed to this Budget strategy because it concentrates on giving to those who already have—to those who have jobs, and to those who have incomes—rather than on investing in the long-term future of industry and on getting people back to work to create the wealth needed for all the social services and for the public expenditure that we and many others would like.
§ Sir Peter Emery (Honiton)
I was pleased to note the number of aspects of the Budget welcomed by the hon. Member for Stockton, South (Mr. Wrigglesworth). One might have expected him to welcome the profit-sharing measures. He welcomed also the personal equity scheme and the Budget's approach to unit costs. My right hon. Friend the Chancellor stressed some of the points that were made by the hon. Gentleman, although not in the same way. The Government realise as strongly as the hon. Gentleman that the level of unit costs is one of the major factors that will make or break the long-term strategy for economic advance. Unless unit costs are held down, there will be considerable problems. Although I do not believe that the Government can do this on their own, I believe that a strong Government lead is essential.
I agree with the hon. Member for Stockton, South in only one aspect of his criticism of the Government. The Government will not be surprised to find that, as chairman of the Science and Technology Committee of the North Atlantic Assembly, I am sorry that more has not been done for research and development. Research and development provides one of the ways in which long-term jobs can be created for the future. I do not believe that total expenditure on research and development—whether by industry or by Government through their aid programmes and grants—is sufficient. I should have been much happier if M3—I think it is now known as "broad money"—had been increased by another £500 million to stimulate research and development in industry generally.
I think that it would be surly of me in a debate that should be mainly concerned with unemployment if, as the first Member from the west country to speak, I did not refer to some of the benefits that the Budget has provided for the west country. For many years, I have campaigned for those concerned that charities should receive a greater benefit from tax relief. I strongly welcome, as do many people in the west country who play a major role in charities, the fact that the Government have at last seen the wisdom of the arguments we have put to them.
I welcome also the higher VAT registration limit because of the impact it will have on small businesses in the west country. The threshold has been increased by more than might have been expected. That is obviously a good thing, although I should have liked a greater increase.
I welcome the proper indexation of income tax thresholds for the elderly and pensioners. That change was essential for my constituency and for many people living in the west country.
The abolition of the gift tax structure is of particular concern to small and medium-sized businesses which are owned by people fighting to be able to hand on their businesses to their children. I believe that that measure is more important than the media have said, especially for agriculture.
I welcome the personal equity plan. We in the west country want to see the property-owning democracy turned into an industry-owning democracy. I should be happier if at least part of that investment were allowed pre-tax rather than post-tax, because that would obviously provide greater stimulation.
Because of the type of industry and enterprise we have in the west counry, the small loans guarantee scheme is 464 important. The area depends very much on farming and the capital allowance for agriculture buildings is, therefore, very important.
Those are many of the aspects in the Budget that will be of particular benefit to the west counry.
I have crossed swords more than once with my right hon. Friend the Chancellor in his former capacity as Secretary of State for Energy. I argued that Britain and the United States should have taken the lead in breaking the oligopolistic structure of the Organisation of Petroleum Exporting Countries to bring down oil prices throughout the world. Reduced oil prices are important in stimulating assistance to the economies of underdeveloped nations—for example, Ghana has to pay as much as 47 per cent. of its total foreign currency earnings just to buy the hydrocarbons needed to sustain transport and industry in that country. That will help world trade. Therefore, the decrease in those prices will have a much greater effect in world economic terms than the Chancellor has been willing to estimate. We are fortunate that this will assist in bringing down unit prices. This then has at last come about even if the Government have not been a leader.
I believe that the major aspect of economic policy surrounding the Government's approach is unemployment and the provision of more jobs for the unemployed. That is not just for the economic benefit of the nation. I go back in my political career to Bruce Griffiths and me tossing a coin way back in 1950 as to who should become the first chairman and the first secretary of the Bow group. I lost and, as the secretary, had to write the constitution. However, at no time in my political career or as part of my political philosophy could I ever stand by idly and believe that it can be accepted that 10, 12 or 15 per cent. of our people should be standing by idly, unused, unfulfilled and making no contribution to the economic strength of the nation. Equally, Conservative philosophy involves understanding not just the economic but the emotional effect that unemployment has on an individual.
I do not know how many of us in the House have experienced or known, as I have, the frustration and buildup of desperation which comes from pounding the pavements going to every potential employer in search of work. I do not know who has experienced the frustration in writing letter after letter to advertisers of jobs—and frequently to many who have not been advertising—and more often than not receiving no reply. The degradation that one experiences and the desperate anger that comes when one knows that one can contribute but no one can or will use your ability can turn to a deep bitterness against society and a loss of self-respect. That is a frustration which few who have not suffered it can really understand.
It is no good saying that that should not take place, that it is wrong to have those feelings or that it is nobody's fault. That does not overcome the anger or the bitterness. It is true that the Conservative Government have done more, spent more, and introduced more schemes than arty other Government in the history of this country to overcome unemployment and they have done so in an extensive way. It is right that that should be so because our people deserve it and it is right that their demands should be met. I believe that people who are out of work have a right to demand to contribute to economic growth and that they be given the opportunity to make that contribution and be able to stand on their own feet and not have to rely on the social security benefits which the nation may provide.
465 Therefore, I want to take the time of the House to put forward what I believe might be an entirely new thought in trying to provide a new employment-linked investment scheme. If we accept that the reduction of employment is the Government's major policy objective, the Government must be searching for every way to ensure the creation of new jobs. Therefore, if any scheme could be put to them which would prove positively that new jobs could be created and that in so doing it would not even increase the PSBR or demand a further increase in supply expenditure, such a concept should be seriously considered. That is what I wish to outline to the House.
It is my experience that new investment decisions, when considered by boards of companies in manufacturing industry or elsewhere, which effect expansion rest on a whole variety of matters. However, after the acceptance by a board of proof that there is a market demand or a need for the product or expansion, certain factors come into play. Those factors are the political climate, the availability of labour, investment cost, return on investment, alterations to the liquidity position of the company and the whole structure of how that can be funded. Therefore, the basis of most of those decisions is the financial cost.
If the Government were able to provide some cash bonus to make that investment much more realistic, I believe that it would prove to be a major stimulus, to bring forward schemes which, at the moment, are planned but are held up for the right time or the right amount of money.
In order to encourage companies to invest in new manufacturing industry, I suggest that the Government should ask every company to register at the Department of Trade and Industry the new scheme and the number of jobs that would be created. The Government should provide that any company which registers with the Department of Trade and Industry—it would not have to—would receive an investment bonus, tax free, of £4,500—that figure could be higher or lower; the Government can alter it, because the scheme is flexible—for each job created after the new employee had been employed for 12 months. The company would have to show that the new employee had been taken off the unemployment register and had not previously been employed by the same company during the last three or six months, so that there would be no internal way to get round the scheme. The outcome of that would be to provide a cash bonus for all new investment which created new jobs. Cash is the type of bonus which stimulates medium and small businesses to introduce investment projects, and for the larger firms it would provide an interesting and new immediate cash return for their investment.
The major benefit of this scheme is that it need involve no overall cost to the Treasury. The present accepted cost for an unemployed person is between £5,200 and £5,500 per annum in benefits paid and in the loss of taxation. If the investment stimulated by the scheme was not to be made, the Exchequer would have to meet for a full year the cost of the man who is not employed. The beauty of the scheme is that no money would be paid in grant or bonus until the company could prove that it had employed staff who had worked for a period of 12 months. The saving to the Exchequer would, on whatever analysis one makes, be between £5,200 and £5,500 for each person who becomes employed. The scheme has great flexibility.
466 Without delaying the House for too long, I should like to give three examples. Taking a small firm with a small extension, perhaps creating eight new jobs, if one costs that out, as I have—I would be willing to provide a copy for anyone who is interested—it would be under £40,000. If that company realised that after it had employed eight persons for 12 months it would receive a cash bonus of about £36,000—that is, £4,500 multiplied by eight—can anyone think that there would not be a massive number of small firms which would be looking to expand their businesses? With a medium-sized firm, creating perhaps 80 jobs, a likely and acceptable total for expenditure would probably be about £600,000. At the rate that I have suggested, that would bring in, after 80 people had been employed for 12 months, a bonus of £360,000, which would meet approximately 47 per cent. of the total cost. Why not? The Government will have to spend that money if people are unemployed. Why not spend it in order to create jobs and get people back to work?
The flexibility of the scheme is that is could be for a limited period. In order not to overheat the economy, there could be a cut-off point after the first 300,000 jobs had been registered this year. Furthermore, different levels of bonus could be applied in different parts of the country. There could be a bonus of £4,500 in the north-east, the north-west, in Wales and in Scotland, a bonus of £3,000 in the midlands and a very small bonus in the south-east. And if we wanted to be sexist, different bonuses could be paid for jobs for men and jobs for women, or a bonus could be paid to those who have a family to support which is different from that which is paid to those who have no family to support. Massive flexibility is built into the application of the scheme.
There are two arguments against such a scheme. The first is that people would get round the regulations. The Treasury always puts up that argument. If, however, a company had to prove that it had employed people for 12 months, it would be up to that company to show to the Department of Trade and Industry that it should benefit from the scheme. If one or two firms got round the scheme, so what? It would not matter if 97 or 98 per cent. of the jobs that were created were genuine jobs.
Furthermore, it can be argued that part of this investment would not have to be paid for. Normal expansion would bring many jobs on to the market. The scheme is capable of dealing with that expansion. If 300,000 new jobs were created, while normal expansion created 60,000 new jobs, the amount of the bonus could be lowered to cover the 20 per cent. of firms to which an unnecessary bonus has to be paid. I shall not bore the House with the details, but I know that such a scheme could be worked out.
This is a new concept. It would cost no money and it would result in an incentive for industry to create long-term jobs, not just short-term jobs, that would be of major benefit to the country—in racing terms, no foal, no fee. The Government would have to pay nothing until the bonus was paid. It would have to pay the bonus only after the employer had proved that he had taken somebody off the unemployment register and provided him with work for a year.
Such a scheme would considerably help to create the incentive and the image of a caring Government who are determined to find jobs for those who are out of work. It would not go astray. Surely it is worth a try.
§ Mr. Ron Leighton (Newham, North-East)
We consider the Budget against the sombre background of ever rising unemployment. Despite last year's absurdly described "Budget for jobs", there have been six consecutive annual increases in the number of people out of work. The most worrying aspect is the remorseless increase within those totals of the number of long-term unemployed. They now number 1.4 million, 800,000 of whom have been without a job for more than two years, with all the misery, heartache and waste that that involves. There is no evidence from this pygmy of a Budget that the Government either care or have a clue about what to do about it. There must be a response that is commensurate with the size and scope of this tragedy.
As the House knows, the Select Committee on Employment has produced a well researched and costed programme to give a job guarantee to the long-term unemployed. The House awaits, but now with diminishing expectations, the Government's response, which again has been delayed. The report envisaged taking on 100,000 in the National Health Service and the social services, 300,000 in a building and renovation programme and 350,000 in private industry. This, with 250,000 on the community programme, would amount to 1 million jobs and constitute the guarantee. While awaiting the Government's response, it is to the community programme that I want to address my remarks.
The Minister knows that for the past three years I and the Select Committee have advocated an expansion of the community programme — indeed, an enhanced and improved community programme. This is a programme to help long-term unemployed adults to improve their prospects by providing them with temporary employment, either full-time or part-time, on work which otherwise would not be done but which would be of practical benefit to the community. I devoted an Adjournment debate to this topic. I have taken the initiative in expanding the programme in my constituency, so nobody can say that I am an opponent, or an ill-motivated critic. However, I am forced to take a critical view of the Government's parsimonious handling of the community programme. They are damaging and jeopardising the future of the programme by trying to cut costs. They are spoiling the ship for a ha'porth of tar. This is arousing great, and justified, criticism.
The truth is that the Government's motives are suspect. They are thought to be primarily concerned with seeking cosmetically to reduce the numbers on the unemployment register at the lowest possible cost. Each month, an additional 8,000 to 9,000 people leave the register and take up places on the community programme, thus exerting a downward pressure on the monthly headline figure of unemployment, which the Government will seek to exploit politically. But the present shaving of costs is devaluing the programme and increasingly restricting it to young, single people who are doing low-paid, part-time, insecure jobs. The Budget increase in the average wage from £63 to £67 is hopelessly inadequate. I shall refer to that in a moment.
Recently the Government changed the eligibility rules—probably unlawfully—so that only those who are able to claim unemployment benefit can get a place. As we know, many of the unemployed who are seeking work, especially married women, are unable to claim benefit. 468 The purpose and consequence of this discrimination against women was the cosmetic one of increasing the number of people taken off the register and at the same time reducing the net cost of the programme, because the previous benefits of more of the participants could be deducted from the gross costs. As a result, the net cost of removing one person from the register fell from £2,200 in 1985 to £1,900 in 1986, a fall of nearly 14 per cent.
In addition to such jobs as painting and decorating and renovating community buildings, the community programme is now funding playgroups, latch-key schemes and visiting and day care schemes for the elderly and the disabled. This is to be welcomed but obviously there will be contradictions, tensions and discontinuities between the needs of these schemes and a community programme that has restrictive eligibility and wage and operating criteria and that consists mainly of young, single men. If the Government do not want the programme to be brought into disrepute, they must pay immediate attention to a number of deficiencies and remedy them. The operating cost of each community programme place has never been increased during the lifetime of the programme, despite the increase in inflation. To keep pace with inflation, the current figure of £440 per annum would need to be increased to £514, and this should be done.
Most important, the average wage should be increased. In three years the average wage was increased only once, by 5 per cent. to £63 and, in this Budget, to £67. This miserly movement is insultingly inadequate. It amounts to not much more than one third of the national average wage. The £67 is an average as some—for example, the supervisory staff—get more and others get less. These low rates impair the quality of the programme, for the wages in the community programme have to be the trade union rate for the job.
As these other normal rates increase each year with inflation, the number of hours that can be offered on any community programme project is constantly squeezed down as each agency struggles to keep within the £67 average. This inevitably means fewer hours for part timers and a falling proportion of full timers, both of which damage the programme. In the year to August 1984, nearly 30 per cent. of the 122,600 participants were full time. By July 1985, the proportion of the 175,000 workers on the community programme in the previous year had fallen to just over 17 per cent. The low wages and reduced hours mean that part-time community programme posts are financially attractive only to single people living at home.
Over the same period, the proportion of single people on the community programme increased from 66 per cent. to more than 78 per cent. Older people and those with families, often those longest unemployed, have been squeezed out. While the 18 to 25-year-olds constitute only 36 per cent. of the eligible client group, their participation in the programme increased from 56 per cent. to nearly 60 per cent. from August 1984 to July 1985.
As a result, it is now questionable to what extent the programme is really helping the growing ranks of the longterm unemployed. The average wage on the programme must be urgently increased to at least an average minimum of £75 a week. I estimate that the net cost of that would be less than £100 million per annum. If the Government are not willing to spend that, they are not serious about wishing to solve the problem.
The eligibility rules, which limit recruitment to those drawing benefit, thus discriminating against married 469 women, reinforce the male bias of the programme: four out of five participants are men. These features not only are important for those who are excluded, but have implications for the quality of projects and of the work experience offered.
Another problem is training. At one time, 50,000 training places were to be offered on the community programme. Now, as a result of the decision to reduce the training linked-to-community programme budget by £15 million, only a few thousand training opportunities have been created, yet training, including on the job skills and day release education and training, would be an important part of any quality programme. Is it any wonder that it appears to many that the Government's main motive and priority is to remove people from the register and to massage the unemployment figures as cheaply and meretriciously as possible rather than improving the quality of the programme?
As the Minister knows, I have taken a great interest in, and given my support and encouragement to, the community programme, but this may no longer be possible. Unless extra resources are put into the programme, people like me will have to reconsider their attitude.
§ 7.4 pm
§ Sir Ian Gilmour (Chesham and Amersham)
The hon. Member for Newham, North-East (Mr. Leighton) has made a closely informed speech. He and I disagree on a number of matters, but I have a great deal of sympathy with what he says and does, if I may say so, in his capacity as Chairman of the Select Committee on Employment.
A number of criticisms can be made of the Budget, but one which cannot be made is that the Chancellor has inflamed the Labour party into opposition. While the hon. Member for Kingston upon Hull, East (Mr. Prescott) was making a very lively speech, he was supported at no time by more than seven Opposition Back Benchers, and usually fewer than that. The Chancellor can be pleased that there is so little opposition to him from the Opposition Benches. Although the attendance on Conservative Benches has not been overwhelming, it has been a good deal better than that on the Opposition Benches.
As everybody agrees, the Chancellor has produced an extremely ingenious Budget with a lot of good things in it. What he has done about the victims of Nazi persecution is good and right—so right that one wonders why it was not done many years ago, but I suppose that nobody thought of it. I thoroughly welcome that, just as I welcome what he has done about charities, which I think will be beneficial from every conceivable point of view. The same applies to his proposals on shares and profit sharing and matters relating to popular capitalism.
I have a less warm welcome for the 1 per cent. cut in income tax because I believe that that money could have been far better used. Moreover, the income tax cut looks a bit odd beside the £2 billion increase in rates which is apparently projected this year. No doubt some of that sum is due to the policies of authorities controlled by the Opposition parties, but a good deal of it is due to the policies of the Government.
Buckinghamshire is Conservative-controlled and has a very careful and economical county council, yet entirely because of the Government's actions it has had to impose 470 a rate increase this year of no less than 30 per cent. together with a small cut in services. Therefore, I fear that the ratepayers of Buckinghamshire will not be greatly impressed by getting 1p off their income tax.
However, in my view, the chief objection to the cut in income tax is that it will produce fewer jobs than almost any other conceivable way of using that money. I greatly welcome the Chancellor's special measures for the unemployed, but, despite the strictures which my right hon. and learned Friend the Paymaster General and Minister for Employment gave in a persuasive but, to me, not wholly convincing speech when he complained that people should judge the measures by the amount of money that they cost, no doubt other considerations should enter into one's judgment on these matters, but I still feel that a net cost of £100 million is a good deal less than excessive. It is inadequate particularly because the lower oil price will produce lower inflation, affording the opportunity therefore for greater growth. Unemployment should, I hope, begin at last to fall a little this year, but, in view of the level that it has now reached, that will not be enough.
The Government's economic policy has had a number of successes. The way in which the exchange rate has been managed in the last few weeks with the fall in oil prices has been very skilful and has shown some good decision making by the Chancellor and some adroit management by the Bank of England.
Whatever the other successes in the economic policy have been, undoubtedly there has not been a success in regard to unemployment. The Chancellor spoke on Tuesday of five years of solid growth. Unfortunately, there have also been five years of solid growth of unemployment.
A number of changes in the counting of unemployment have been made over the years, but if we use the current definition of wholly unemployed adults seasonally adjusted, unemployment was 2,144,000 in March 1981, it has grown every year since then, and it is now 3,210,000, a solid growth of just over 1 million. If one used the previous definition, one would find that the rise was even greater. The policy on unemployment, to put it mildly, has not worked, yet it has not been changed.
Even more remarkably, the rhetoric defending that policy has not changed either. We are still told constantly that the Government cannot create jobs and that the only way that unemployment can be reduced is by bringing down inflation, by increasing efficiency and by people pricing themselves into jobs. In his Budget speech on Tuesday, my right hon. Friend the Chancellor said:
The solution to the problem of unemployment—it is the only solution—requires progress on two key fronts. The first is a sustained improvement in the performance of business and industry, and thus of the economy as a whole. That is what every aspect of the Government's economic policy has been designed to assist, and it is already achieving impressive results. The second is a level of pay which enables workers to be priced into jobs instead of pricing them out of jobs, and which in particular ensures that British industry can hold its own against our major international competitors."—[Official Report, 18 March 1986; Vol. 94, c. 171.]On the first point, assuming that my right hon. Friend is right in saying that the Government's policy has already achieved "impressive results", it has to be said that those results have achieved nothing that is good in regard to unemployment. As to the Chancellor's second point, assuming that that too is correct, the pricing into jobs has not happened over the last seven years. One wonders what 471 the Government or the Chancellor can do to ensure that it happens now. Just a mild exhortation has not been productive over the last seven years. One wonders why it should be productive now.
Therefore, considering the results of the policy and the rhetoric, it seems to me that there are only two possible conclusions. The first is that the policy is mistaken, and the alternative is that unemployment is a relatively unimportant matter and should not be allowed significantly to affect economic policy. Having listened to the extremely humane speech of my right hon. and learned Friend the Paymaster General this afternoon, I think that the first conclusion is right. He confirmed that the second alternative is the wrong conclusion, although perhaps he did not mean to confirm that the first conclusion is right.
There is no mystery about the reasons for the failure of the policy. On Tuesday the Chancellor rightly took pride in the growth of productivity. He pointed out that since 1979 productivity in manufacturing industry had increased by an average of 3.5 per cent. a year. The rise in productivity in the economy as a whole is naturally a little less, but I think that it rose by nearly 3 per cent. between 1981 and 1985, which is still substantial.
The Chancellor also said, as reported in column 166, that we could look back on five years of growth at about 3 per cent. a year. I may be wrong about this, but to judge from page 40 of the Red Book the Chancellor must be looking forward as well as back and including 1986 in that calculation, because, if 1986 is excluded, growth seems to have been at just over 2.5 per cent. a year. Moreover, if oil is excluded, as I think it has to be for these purposes since it employs very few people, growth has been about 2.25 per cent. a year. That is the explanation of the growth in unemployment. There has never been a five-year period with that rate of growth in which unemployment did not rise. Unless output rises as fast as productivity, which it should do this year, unemployment will continue to rise.
My right hon. Friend almost always bases his calculations on 1981. In doing so he misleads himself because between 1980 and 1981 employment increased by 1 million. If the growth rate is taken from 1979 instead of 1981, it is either 1.1 per cent. or 1.2 per cent. a year. That again is the cause of unemployment.
As I said, unemployment should fall a little this year with the growth in output of 3 per cent. but, according to the Chancellor's forecast in the Red Book, in the two subsequent years growth will be only 2.5 per cent., which means that on current policies there is unlikely to be much, if any, further fall in unemployment, on the Chancellor's own figures. So a change of policy is clearly necessary. We need more growth and more special employment measures to get unemployment down. It is sad that the Chancellor has not taken the opportunity to make that change.
Many proposals have been made over the years by a number of people, including myself. My right hon. and learned Friend the Paymaster General talked about instant proposals. In fact, proposals have been made over a period of at least five years. So they are far from instant; if anything, they are extremely stale. The proposals have been there for some time, but unfortunatley nobody has paid much attention to them.
What is needed is a combination of measures, including increased expenditure on infrastructure. Again, my right hon. and learned Friend was scathing about that this afternoon; perhaps he should have a word with the 472 Confederation of British Industry, which does not agree with him on it. I was not sure about the point which he was seeking to make about the shortage of skills. It seems to be a heavy condemnation of the Government's policy that, even with so much unemployment, there should be such a shortage of skills. Obviously there should be a combination of increased expenditure on infrastructure, a reduction in taxes on employment, and special meaures of the sort recommended by the Select Committee chaired by the hon. Member for Newham, North-East.
Such a strategy is needed not only because of the 3 million unemployed, although that is reason enough in itself, but because of the severe structural problems that the country faces. The Chancellor sought to make light of these problems and made rather a good flip comment about them in his Budget speech.
On a number of occasions my right hon. Friend has denigrated the House of Lords Select Committee, but there are at lest two answers to what he said. The first was given yesterday. There is all the difference in the world between a fall in the price of oil which helps almost everyone and a fall just in our oil revenues and our balance of payments which harms only us. The second answer, which is perhaps even more important, is that the problems of Britain's lack of competitiveness in manufacturing trade were evident long before we had any North sea oil. Therefore, the idea that they will disappear when North sea oil disappears is distinctly implausible. As the House of Lords Select Committee rightly said, the problem of the growing competitiveness of British industry will not solve itself.
I continue to believe that there is cause for serious concern about the future of British manufacturing industry and our competitiveness. Meanwhile, I regret that the Chancellor has not chosen the best way to make capitalism both popular and caring by reducing unemployment.
§ Mr. Max Madden (Bradford, West)
Opening the debate today on behalf of the Opposition my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) quoted the views of various newspapers on the Budget. I want to quote from the editorial, not of a national newspaper, but of my local newspaper, the Bradford Telegraph and Argus. The editorial was headed "Whole lot of nothing":Once again a Tory Chancellor has robbed the poor of an opportunity to climb out of the poverty trap in favour of paying the rich with his measures to encourage wider share ownership.While the Chancellor patched up his fiscal policies, he left the real core of the problem untouched. In failing to introduce any measures to cut the dole queues he is guilty of gross dereliction of duty.The decision to spend around £200 million increasing the number employed under the so-called Community Programme is little more than window dressing.What the low paid and the unemployed needed was some real help—or at least the prospect of some light at the end of the tunnel. Instead all Britain was offered was a cosmetic exercise. No amount of this sort of make-up can cover the malignant growth of unemployment.Certainly the Budget will do little to help Bradford and its problems. There were no measures to help regenerate the inner city areas and little to encourage a business community still reeling from the near 30 per cent. rate rise.That was the authentic voice of the north, which is dominated by mass unemployment, poverty and deprivation. What is so tragic and sad about the Budget is that it was a Budget for the people who do not live in the 473 north. It was a Budget of the haves against the have nots, of the comfortable against the uncomfortable, and of the south against the north.
The right hon. Member for Chesham and Amersham (Sir I. Gilmour) chided the Opposition for not being inflamed by this Budget, but I think that he let the cat out of the bag as to why there are so few people in the Chamber protesting against the Government. He has said that for five years he and others have been putting forward alternatives to this Government, but they have not been heeded. The problem is that we have a Government who are deaf, uncaring and locked into their own dogma, and are not in any way prepared to respond to constructive alternative policies which are posed in this Chamber or any other place.
The right hon. Member for Chesham and Amersham and the right hon. Member for Guildford (Mr. Howell) are present. We have had a fleeting glimpse of the right hon. Member for Cambridgeshire, South-East (Mr. Pym); and the right hon. Member for Hertsmere (Mr. Parkinson) was here a few moments ago. They are members of the Conservative party who have been defeated and who have been complete failures in persuading the Government to change course.
This Budget should have been about creating real jobs—the jobs to which the Prime Minister referred so much between 1976 and 1979. It should have been about combating poverty, which grips my constituency. One third of my constituents are on social security. More than 20 per cent. of them are unemployed, with the situation getting worse daily.
The Budget should have been about doing something positive to help manufacturing industry. The reality is that it does very little. At times, I read the Daily Telegraph, the house journal of the Conservative party, and yesterday, tucked away in its vast and often euphoric response to the Budget, was this little news item under the heading "Opportunities for Jobs Missed":
Builders said the Budget would push more people 'into the black economy', and that it had missed the chance to create permanent jobs in construction by putting the emphasis on cosmetic schemes for teenagers. The Building Employers Confederation said part time training schemes are helping to produce more people doing botched jobs for householders, offering lower charges because they evade paying value added tax. The Federation of Civil and Engineering Contractors also regretted that the Chancellor had 'not taken the option to create real jobs' by new investment in infrastructure projects. This was the cheapest real way of creating extra jobs.The Paymaster General may choose to deride and sneer at that positive alternative proposal, but it remains the truth. I think that everybody, except the Government, recognises that money put into new buildings and into the renovation and improvement of old buildings is the best way to tackle one of the most urgent social problems facing this country — deprived slum areas and overcrowded housing—and will create a great many jobs quickly.
My own city at present has 9,000 people on the housing waiting list; 10,000 applications for home improvement grants have been rejected; 5,000 properties have been found to be structurally defective, and 5,000 more without water, inside toilets or bathrooms. That is the collective inheritance which we could tackle tomorrow with money and conviction if the Government had the political will to 474 do it. The sad fact is that that will does not exist, and will not exist until the people of this country have pushed this Government into changing the direction of its policies.
More resources should be made available for housing, especially to local authorities. We need a relaxation of the limits on capital receipts—another way of unlocking a lot of money which could be put into housing. There is disappointment in my city that we were left off the list of eight cities to receive special help in tackling our inner city problems. I hope that the Economic Secretary will be able to say when Bradford will receive additional help to tackle our problems. We meet every criteria of the other cities that were given help, and we have the unique feature that our population is due to increase by 10 per cent. in the next 20 years.
The Budget does nothing for the poor. It is obscene that it took money away from the unemployed. It gave £9 a week extra to people on £50,000 a year, but the family on £4,000 a year were lucky if they saw an extra £1.60 a week. That is the scale of this Government's priorities. Those are their real feelings about the people of this country. They are happy to give still more to the rich and take it away from the poor, which, of course, is what they have been doing ever since they were elected in 1979. We know that the best way to help low-income families is to increase child benefit. Even the Conservative Women's Organisation wants to save the child benefit. It has joined with many other organisations in campaigning to persuade the Government to increase child benefit as the most effective way of combating low income family poverty.
However, the Government gave a miserly 10p increase in child benefit, at the same time as the insulting increase of 40p a week for pensioners. Cutting the basic tax rate and lifting personal allowances is the least effective way of combating poverty. The Government know this. Every organisation that is concerned with poverty knows it, and yet the Government continue along the same course.
I hope that the Government will come to see that what we need are not further cuts in basic taxation but substantial and sustained increases in child benefit as the best way of giving substantial extra amounts of money to low-income families, who will spend that money, and thereby stimulate the economy as a whole and local economies in particular.
The Budget has done nothing to help manufacturing industry. We were looking for a positive strategy that would assist manufacturing industry, particularly through lower interest rates and a low exchange rate.
My chamber of commerce has conducted continuing surveys of local companies, and every survey has shown that the two biggest constraints on business in Bradford over the past 24 months have been high interest rates and high exchange rates. This Budget has done very little to assist manufacturers in my city, and they have already said so in reports published in the Telegraph and Argus yesterday. Certainly it is not creating a situation whereby they can look with confidence to increased orders, still less to taking on more employees.
Bradford is a city suffering immense problems. It is a very proud city, and we are very independent, gritty people, who want to help ourselves, but we have reached a situation where we shall not be able to arrest the spiral of decline that faces our city unless there is Government intervention, substantial amounts of Government resources, and sustained Government assistance.
475 The biggest employer is the local council. We are now facing substantial cuts in the rate support grant, which has led in part to a substantial increase in rates of 30 per cent. The largest party on Bradford council is the Conservative group, which is supported by the Liberal-SDP alliance. We have seen also the cost of the measure abolishing the county councils. These factors have led to a 30 per cent. rate increase.
The second biggest employer is the university of Bradford. In 1981, the cuts in higher education resulted in a large number of redundancies, a reduction in students, and the closure of three university departments. They also took £6 million out of the local economy. Cuts over the next three years, estimated at 3 per cent. a year, will take further enormous amounts of money out of the local economy, as will the mere 2 per cent. increase in student grants. Increasing pensions and other benefits by less than the rate of inflation will mean yet more money going out of the local economy.
Last Friday, I attended the inauguration of Sir John Harvey-Jones, chairman of ICI, as the new chancellor of the university. The House will remember that about 18 months ago he was very vocal in challenging the Government's view that the expansion of the service industry would compensate for the loss of manufacturing industry, and last Friday he was critical of the Government's education policy, particularly in respect of higher education. A number of other speakers, including the vice-chancellor, were equally critical of the Government's approach.
It is a scandal that Bradford university will be closing its physics department. This university, together with Aston and Salford, faced enormous cuts in 1981. The Government tell us almost daily of their belief in support for technological advance. How can they reconcile those claims with cuts in higher education generally and massive cuts in particular in technological universities? It is lunacy.
West Yorkshire has the lowest wages of any urban area in the United Kingdom, but people still have the audacity to say that if only workers accepted lower wages they would price themselves into employment. How can that be true when, in an area of traditionally very low wages, we have well above the national average of unemployment? These are the economics of the madhouse. It is unbelieveable that the Government are daily trying to persuade all of us that if only people would accept low wages there would be more jobs and more job security. If that were true in Bradford, we would have some of the lowest levels of unemployment instead of some of the highest.
The impact of the social security review will be not only to reduce the incomes of the poorest—the pensioners, the disabled, the unemployed, the single-parent families and many others—but to take massive sums of money out of the local economy, reduce demand and exaggerate and intensify our problems. We want a reversal of those problems, so that we get more resources into the local economy, stimulate demand, the opportunities for jobs and the expansion of industry to produce more goods and services. We are trapped in a spiral decline. We have seen massive job losses in manufacturing industry, particularly textiles, but we are not seeing job opportunities in service industries to compensate for those job losses.
Our population is growing. We are not unduly optimistic about the prospects of attracting new industry 476 into the city. A recently published major report said that the main hope must be to expand existing industries rather than attract new industries to greenfield sites.
We want support from the Government, and priorities that give the utmost support to inner cities, such as Bradford, which are facing enormous and grotesque problems. We do not want tea and sympathy, although Ministers visit us almost daily to give us that. We want action and money and resources to help us. We want to see jobs, housing and schools.
At the moment, teachers are delivering letters to the homes of 650 pupils at the Belle Vue school, in my constituency, saying:We are seriously worried about lack of money in education. At this school we are desperately short of room and the heating in the winter is very poor.Bradford probably had more publicity over the past two years about the controversy over the head teacher at Drummond middle school, Ray Honeyford, than we have had in any other comparable, controversy. Many of the people who campaigned for that head teacher's right to free speech are not now campaigning to improve the fabric and conditions of schools, including the one involved, although I would welcome it if they did.
Most of the schools in my constituency were built when Queen Victoria was on the throne. They are falling down, leaking and in an appalling condition, and they are not fit places in which to try to give the best possible education to our children and the generations of children to come. We lack the resources to deal with the schools, environmental and infrastructure problems—the enormous problems of dereliction and trying to clear away old buildings.
The Chancellor spoke about Britain now being a property-owning democracy and said that he wanted it to become a share-owning democracy. As my quotation from the editorial of my local newspaper shows, such aspirations are as remote from the perspective of my constituents as if the Chancellor had been speaking from Mars. The thought that many of my constituents will be able to invest £200 a month is ludicrous, as were some of the other remarks in the Budget speech.
The Government have stolen millions upon millions of pounds from Bradford by cutting the money that they give to local authorities to support services. Overall, the cut is 17 per cent. The Government have stolen a great deal from Bradford pensioners, the unemployed, the disabled and single parents by a cut in benefits or by not increasing them by more than the increase in the cost of living. They have stolen money by not giving more in housing investment and something to deal with the structurally defective buildings and many other problems to which I have referred. The people of Bradford have no reason to thank the Chancellor for this Budget, and that is simply because it has done nothing for them.
§ Mr. David Howell (Guildford)
The hon. Member for Bradford, West (Mr. Madden) called for lower interest and exchange rates, which he said were badly needed. As he has got both those things—interest rates have already fallen and will fall further and the exchange rate against the deutschmark has moved down dramatically, as it has against all other currencies except the dollar—I would have expected him to recognise those benefits, although he had many criticisms and strong feelings about the state 477 of the city that he represents. In a way, that was a good example of how some of the Government's critics, who can always pick on particular points when things have not gone well, have got into a flywheel state, where the criticism spins on like some tired cassette without them recognising that we are moving into a new economic situation in which manufacturing is expanding, industrial relations are vastly improving and the potential for growth is great. We are achieving something that the Labour Goverment said could never be achieved—they failed to achieve it themselves—steady expansion with inflation low and falling.
I want to pick out at this late hour in the debate one particular aspect of the argument. Through all the criticisms of the Government's current policy there has run the view that tax cuts do not help the unemployed. Indeed, the whole of the speech by the hon. Member for Kingston upon Hull, East (Mr. Prescott) was made as though these were two completely separate things. The same idea ran through the speech of the hon. Member for Bradford, West. I wish totally to repudiate that view. I do not rule out the case for more local government capital receipts being spent, and I wish that there had been more room for that in the Budget. But to argue that is the only way forward and to shut one's eyes to the immense power of tax cuts to wage war on unemployment and poverty is to be absolutely blind to what is happening in economies in the rest of the world and to what is happening in our economy as well. The more one looks at the world, the more obvious it is that there is a very detailed correlation between lower taxes and more jobs.
In the United States the number of jobs created in January was a staggering 565,000, of which 75 per cent. were in the service sector. In that economy jobs have been increasing at the rate of 355,000 a month since the middle of last year. There are other examples also, of which, of course, Japan is the classic one. Its total tax take is more than 10 per cent. below the tax take of the United Kingdom and its unemployment rate is 2.8 per cent.
The message seems to me to be one that can only be ignored by simply insisting that the facts of today's world economy do not exist.
Tax cuts do help jobs, in particular—this is the point I want to concentrate on—the kind of tax reductions which enlarge personal savings, encourage small enterprise and self-employment and, above all, extend personal ownership and pride in ownership. The motivations for enterprise and towards the social obligations that go with ownership are, above all, the forces that are going to help most to create a fully occupied society, which of course we have got to achieve and want to achieve. One proposition we hear is that this can be done by creating a million jobs through public works expenditure, and so on. Maybe there is some truth in the argument for capital spending, but to ignore the influence of tax cuts is to try to stand a chair on two legs, which of course will not succeed.
Ownership tax incentives are immensely valuable and powerful and help all communities, including the community about which the hon. Member for Bradford, West has just been speaking, to begin to create within themselves the seeds of business, enterprise, job opportunities and occupations which have been so sadly missing in so many of our rundown city areas.
478 That is why I welcome enormously the strong emphasis in this Budget on enlarging personal ownership of all kinds, and welcome in particular the personal equity plan scheme. I must confess to my right hon. and hon. Friends that when I first heard the Chancellor speaking about it I thought for one moment that we were really going for a scheme allowing every wage and salary earner to put, tax-free, £2,400 into a personal investment pool. That really would have been a Loi Monory and that is the kind of way we want to go. This is not a fantasy; other countries have done it, so that millions of workers can share in the wealth of the nation in which they work. Although we have not been able to go that far yet—and the PEP is an excellent first step—we must be quite clear that these objectives are obtainable in the future. I am very glad that the Budget contains that proposal.
I want to put a few further thoughts to my right hon. and hon. Friends about the next steps in this vital drive for wider ownership, which I believe should be the major social goal of a Conservative Government in the 1980s and 1990s, and I hope that is the way that my right hon. and hon. Friends are thinking.
First, we have to be clear about the different paths to wider ownership that need to be pursued, possibly together, because they are not necessarily alternatives.
There is the question of profit sharing, which the hon. Member for Stockton, South (Mr. Wrigglesworth), speaking for the SDP, mentioned. I know that his party is keen on such things. The Budget contains proposals, which I gather the Chancellor is now discussing with industry, for seeing whether profit-related payments can be built into the wage system. We are years behind other countries on this. Japan has a system under which one quarter of all wages is paid in bonus, and that bonus is discretionary, and in some cases it attracts tax privileges. I think in the next phase we should be looking towards a tax privilege, a tax incentive, being related to the bonus rather than just, as at present, to employee shares. At the moment, if employee shares are given, tax privileges arise. Income tax is not paid, nor is capital gains tax, if the shares are held a certain time. So it should be for the bonus idea. It certainly has an amazing effect in encouraging the taking on of new workers. Some very interesting ideas are now circulating, originating largely in America and Japan, on the power of the bonus system in wage settlements, in expanding employment, in encouraging the taking on of more people and, of course, in motivating the work force.
Secondly, there is the whole area of ideas related to wider ownership of shares. Here I really must take issue with the hon. Member for Bradford, West. It is not an idea just for the elite. That is really a very old-fashioned, quaint belief. We are talking about the potential for millions of families to have a stake in the country in which they live. It is very interesting that, when the British Telecom issue was organised, 26 per cent. of the adult population, I am told, made inquiries about buying shares. That means that 11 million people were interested in becoming owners as well as earners. I think that we should now aim, through our policies, at establishing at least that number of people who are familiar with the ownership of shares and equity in the industry of this country. I should like to see incentives not merely for those who are lucky enough to be employees in firms where shares are handed out, but for everybody, including public sector workers, to become shareholders in this nation.
479 We can do much better. Neighbouring economies have done much better and there are many more people involved in sharing the growing wealth which inevitably develops as industry becomes more capital-intensive and more based on knowledge and high technology.
Thirdly, there is the idea of citizen ownership, which Samuel Brittan has written about in the Financial Times very interestingly. This broadly means that shares should be distributed by the Government free or at a very low cost to millions of people. It is an idea that I have tried out in the past on some of my colleagues, but I did not get anywhere. That should certainly be considered, possibly based on the idea of bearer bonds.
In the 1960s and the mid-1970s we looked at a plan in British Columbia, Canada, where they had distributed shares in the major utilities to every citizen, and we saw how that worked. It did not bring immediate benefit to all the citizens of British Columbia, but it is an idea for involving people in a far better way than any kind of centralist Socialism and nationalisation, and all that outdated nonsense.
The fourth idea is one that my hon. Friends have pushed for very hard in recent years—to widen the ownership of small business. That is the living expression of ownership, and I am glad that so many measures have been pushed through to create this. I am also glad that the enterprise allowance has been reformed slightly. I did not like the way that it was working before, and I am delighted to hear that the tax anomaly is to be corrected.
We must now move further on this front. This is the area in which for two decades now some of us have been arguing that the major thrust is required to move away from the dead hand of collectivism and the nationalised compassion which has been bound up in the outdated welfare state. The areas in which we now need to make progress are the following.
First, we should go further towards substantial tax relief for every wage and salary earner for putting money aside for personal investment, not necessarily investment that is lost in the great institutions, but investment where there is a personal connection—investment ideally in small and rather localised business. A lot more could be done at local level to encourage the link between saving and new jobs and investment.
Secondly, we need to transform the input into our education system as far as business is concerned so that children really understand how enterprise works, how a capital-owning society operates and what the opportunities are for them in that kind of society. That is changing a bit, but there is still too much emphasis on the idea that somehow the jobs will be provided by somebody else or manufactured by the state, which really means that millions of people have to pay taxes to subsidise other people on low incomes.
Thirdly, we need to see a social dimension in this whole area, by which I mean far more encouragement of those who have capital and savings to fulfil their social obligations by doing voluntary work, helping charities, giving, caring and generally filling in the bits and pieces of a sensitive caring society that the welfare state has failed to do. That is why I am delighted at the measure in the Budget which directs people's attention towards charities, and which allows them to deduct from their payroll a small annual amount to give to voluntary work. That is a step in the right direction and part of the jigsaw—the new pattern for the future.
480 Fourthly, if we are to have more capital owners in a more flexible society with opportunities for small business job creation, part-time jobs and all the things that will grow—it is no use the Labour party saying that that is the wrong direction because that will be the pattern of the future—society will need to be supported by good public services. We are learning that many public services can be better organised on a privatised, decentralised basis. We thought that telephones, water systems and big public services could be run only centrally, but that turns out to he wrong. Nevertheless, the undelegated services that remain with the Government should be properly supported. If the railway system cannot be privatised, I should hate to see it run down. It should be better supported. Similarly, I should hate to see other basic services inadequately supported. The priorities should be clear. Earlier one hon. Member called for more expenditure on roads and hospitals. The roads programme is already enormous, and so is the hospital building programme, so I doubt whether extra capital spending is needed there. But more is needed in other areas, and I was sorry that there was not sufficient emphasis on that in the Budget.
We need not only the enterprise culture, of which my right hon. Friend the Chancellor of the Exchequer spoke, but an ownership culture. We are sorry to see a further steady expansion in the real economy. It is happening now, and it will continue in the coming year. However, it will tend to be concentrated on capital growth; and it is essential for the Conservative party to recognise the need for the benefits of that capital growth to be spread, not concentrated. Wealth must be spread. Inevitably we shall see this new kind of growth in expanding rewards for capital-intensive industry, not so much in factory jobs of the old-fashioned sort of the 1950s and 1960s.
The key social goal of Tory party policy in the 1990s should be to achieve mass ownership and to disperse power and wealth to the people. I hope that next year's Budget will take us a long way further down that road.
§ Mr. Peter Pike (Burnley)
I shall not follow the line of the right hon. Member Guildford (Mr. Howell); I shall pursue the line of my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) in his opening speech. My hon. Friend showed clearly the Government's failure yet again to use the opportunity of the 1986 Budget to tackle the real problems facing us, and to take positive initiatives to get people back to work and to deal with the unacceptable unemployment position. Tory Members often fail to listen closely to what we in the Labour party say. My hon. Friend made it clear that the Labour party neither believed nor claimed that it could get 4 million people back to work in traditional industries, or that the measures that it would take to put money back into the economy would put everybody back to work in the lifetime of the next Labour Government. He made it clear that we would have to take many measures to distribute the work and wealth available.
There is one major difference between the two main political parties. The Labour party accepts that we shall never employ as many people as we did a few years ago in manufacturing industry and many other areas because of new technology, and that new technology must certainly be used in our industries if we are to compete in the market places of the world. The major difference is that 481 we believe that we must ensure that the whole of society benefits from that change and that there is not an elite in work whose standard of living continues to grow while the standard of living of the unemployed, the retired, the sick and the disabled not only fails to maintain its present level, but ultimately starts to decline. If the Conservative party continues to pursue its present policies, we shall face that position in the not too distant future.
My hon. Friend the Member for Bradford, West (Mr. Madden), in a powerful speech, described how the Budget would affect the people of Bradford. The same case may be argued for constituency after constituency. The Budget has failed to tackle our problems, and once again is disastrous for the majority of people. I accept that this year the Chancellor of the Exchequer did not describe the Budget as a "Budget for jobs". Indeed, if Ministers were liable for prosecution under the Trade Descriptions Act 1968 the Chancellor would have been the first of many to face legal action for his false representation of the 1985 Budget.
When the Chancellor presented this year's Budget, he said that the aim was to concentrate the benefits of his limited room for manoeuvre following the oil price collapsenot on the rich but on the great majority of ordinary taxpayers."—[Official Report, 18 March 1986; Vol 94, c. 183.]The Budget fails to live up to his comments. It is a Budget for those in work. It does not try to get people back to work. It does nothing to remove the barrier and widening rift that exists between the south and the north. Some places in the north may be prosperous, and some areas in inner London may be deprived, but on balance the north is deprived and the south is prosperous. It is time that we sought to eliminate and reduce that widening rift.
Today the Paymaster General referred to additional expenditure and described what the Government were doing regarding health. In my constituency ambulances cannot run people to hospital for outpatient treatment, because they are on a quota system, and once they have used their allocation of quota no ambulances are available. Even emergency ambulances are stretched to the limit. Two hospitals are proposed for closure. While I accept that Burnley general hospital is to have an extension, that extension gives the Government and the National Health Service an opportunity to use the old premises to ensure that those on waiting lists and those needing geriatric care are given the necessary care and attention.
The Paymaster General referred to my hon. Friend the Member for Oldham, West (Mr. Meacher), and quoted him as having made promises all over the country at various meetings about what the Labour Government will do—and a Labour Government will be elected at the general election. Once again, the Paymaster General failed to listen carefully to what my hon. Friend and other Labour party Members have said. We were fortunate to have my hon. Friend speaking at a public meeting in Burnley recently. While he made the Labour party's priorities clear, he was careful to make it absolutely clear that, because of the mess that we shall inherit from this Government, we cannot make promises to do everything that we should like to do during the lifetime of one Labour Government. The Opposition recognise that five years will not be sufficient to repair all the damage done by this Government.
482 The move to assist charities is welcome, but the proposals about VAT could have gone further. However, that is a move in the right direction, and the provision to allow companies to make one-off payments is also an attractive feature. I hope we shall see companies responding to that and taking the opportunity to make donations to charities. Of course, that money will be in addition to the covenanting payments that companies are already able to make.
The capital transfer tax on lifetime gifts is to be abolished and replaced by an inheritance tax. Few people in my constituency will benefit from that. It is a totally wrong move, and one made to assist the wealthy. It is not acceptable. The Government should think again.
The Government should spend more money on housing and improving the infrastructure. The £935 million that they are using to reduce income tax over and above the rates fixed by indexation could have been used for those purposes and would have been a small step in the right direction. The Paymaster General said that not many people work on the construction of sewers. I accept that may be true, but he fails to recognise that the materials used to carry out that work are important. While the work on sewers may be minimal, it would put other people back to work making the materials.
The Paymaster General also said that the Federation of Master Builders was unable to recruit the type of labour that it required. He spoke about general labour, but especially skilled craftsmen. Some employers are unable to recruit the skilled workmen they need because of Government cuts in the last few years. We no longer have the apprentices getting the training that they require, and in a few years that will be a major problem.
Until financial pressures were put upon them, the direct labour organisations of local authorities were the biggest single organisations in the building industry that gave craftsmen training in joinery and plastering and other types of building trades. Direct labour organisations had a tremendous record of training craftsmen and tradesmen. The Paymaster General should not take at face value what the Federation of Master Builders has said. That information should be considered much more closely.
Just two weeks ago in the House of Commons representatives from the Confederation of British Industry in the north-west met Labour Members from the north-west and separately a number of Conservative Members of Parliament. The CBI was quite clear in saying what the priorities in the Budget should be. It said that at least £1 billion should be used to get people back to work. Its representatives did not believe that income tax should be a priority. They were quite clear that, if there were to be cuts in income tax, the adjustment should be to the threshold, not to the basic rate. The Government have failed to take the opportunity to do that and have chosen to reduce the basic rate by one penny at a cost of £935 million in 1986–87 over and above the statutory indexation.
The cut of a penny in income tax is nonsense. The Government should not have moved in that direction. The benefits for the ordinary working person as a result of that cut are minimal, and the money could be better used for house building and repairs. Like my hon. Friend the Member for Bradford, West, I have people in my constituency who cannot get repair or improvement grants for their houses. Council houses are deteriorating, and there are many problems that this £935 million could have 483 been used to solve. By spending it to solve those problems we could have got people back to work. If we had to have an income tax adjustment over and above indexation—I say "if' because that is not a priority—it should have been an adjustment to the threshold. That would have been of greater benefit to lower paid people.
The right hon. and learned Member for Dover (Mr. Rees) talked about graduated rates and different bands of income tax. Perhaps for the first part of taxable income we should have a lower rate, because that again would benefit lower paid people. However, that is not a priority. Perhaps we could think about it when more money is available because it is nonsense to adjust the basic rate to 29p rather than to have a lower intermediate rate. As a result of the Budget, the public sector borrowing requirement is set at £7 million, or 1.75 per cent. of gross domestic product. Bearing in mind the problems facing us, that figure is ridiculous.
Hon. Members on the Government side have said several times during the debate that the Labour party should lay the cost of its programme before the House. When the Conservative party faced the 1979 and 1983 elections it never said to the electorate that the country would end up with 3 million people out of work or that to control inflation it would cut public expenditure and hit most those who are deprived. Our poorest people are the ones that this Government have hurt most of all. They are the people living in the most deprived areas and they have suffered as a result of this Government's policies.
We will make our plans clear to the country before the next election, but the Conservatives should spell out exactly what they intend to do. I should like them to tell the people what they will do when they have disposed of all our publicly owned assets. British Telecom has already gone, and another of our assets is British Gas. By selling those assets the Government get an income for one year and use it either to benefit the taxpayers or for public expenditure. Once that money has been used, it has gone and cannot be used again.
One could go home this weekend and sell the gas cooker and the fridge and have a good weekend out, but the sale of those things would be regretted the following week. This Government will regret the disposal of our assets. It is not only the asset that goes but the income from it, and that income is lost not just for one year, but for year after year. On British Gas alone we are talking of a present benefit on profit of £1.5 billion each year. The Government will eliminate that asset and put it into private hands.
The Budget dealt with the extension of the pilot scheme for the long-term unemployed. Burnley was one of the enterprise areas. That extension is a welcome move, although the £40 a week the applicants receive is perhaps too small when related to the £1,000 that each applicant has to find. That will be a deterrent to some people entering the scheme. The scheme has certainly had considerable success in Burnley, but it will not solve the problem of unemployment. If the Government believe that it will, they are under an illusion. I believe that that figure should be increased from £40 a week, and that the period should be extended, because many people start to run into difficulties just at the time when the state scheme stops supporting them. The new workers scheme subsidy pays employers £15 a week for all 18 to 19–year-olds if they are paid a wage of up to £55 a week. The Government are again attempting to limit wage levels, and they have often 484 said that low pay is better than no pay. It is significant that the Shops Bill, which is now being considered, contains a clause which removes some of the restrictions, Of course, I accept that the other place has made an important amendment to the Bill. Nevertheless, it is being introduced at the same time as the Wages Bill, which will also remove a lot of protection for the lower paid.
The Government have once again got their policies wrong. They have not faced the issues before us in 1986. They should make more money available to tackle the problems of housing, and the difficulties facing our hospitals as well as all the major problems that exist in areas such as those represented by my hon. Friends and myself. That would put people back to work. That is what the Government should be doing instead of giving handouts to the wealthy.
In 1979, the Conservative Government's first act was to reduce the top tax band from 83p to 60p. That is nonsense. The sands of time are running out for them. They should face the difficulties in Britain in 1986 and get people back to work instead of paying lip service to our problems.
§ Mr. Andrew Rowe (Mid-Kent)
The crudity of the Budget analysis given by the hon. Member for Burnley (Mr. Pike) gives me some hope. I am no economist, but even I can probably do better. To my innocent mind, there is a considerable difference between selling my gas cooker, which means that I shall no longer have one, and the Government changing the ownership of the national gas network, which means that we can still enjoy gas.
Anything that I say about this Budget has to be set against a background of considerable admiration for my right hon. Friend the Chancellor for having dealt with a sudden, swingeing loss of £5.5 billion without rocking the stability of the economy. I do not believe that any other Chancellor could lay claim to such an amazing feat, and I admire him very much.
Debates on the Budget always seem to be an opportunity to lay out the ground for the next Budget. I have three points to raise. My first concerns skill shortages. My second concerns the difficult question of the mixture between private gain and public programmes, and my third involves small firms. However, as other hon. Members wish to speak, I shall be as brief as possible.
Skill shortages are already with us in, for example, electro-mechanical engineering, the teaching of maths and physics and in information technology skills. However, I must admit that the expansion of the information technology industry is limited more by a public lack of understanding than by any shortage of people capable of meeting those needs.
Who really cares about such shortages? The Butcher report is a sign that the Government are at least concerned to some degree. It is true that the Manpower Services Commission recently told the Employment Committee that it was doing its best to collect and assimilate information on skill shortages and to provide job training in areas of acute skill shortages, and of course the infant Open Tech is also being nurtured, but those are minor points. Today, I checked who was collecting information, and I was staggered to be told by the Engineering Employers Federation that that was not one of its concerns.
I hope that my right hon. Friend the Chancellor will consider the short-term palliative of greater mobility for 485 skilled workers who cannot put their skills into practice because they cannot find anywhere to live. I realise that that is not the direct concern of the Department of Employment or of my right hon. Friend the Chancellor, as it involves housing problems. However, I very much hope that the private rented sector will be re-emphasised, with proper safeguards against Rachman-like landlords. Those who sell their houses for £15,000 or £30,000 in order to move to areas with high employment find that they cannot afford to buy a house, and so return home disenchanted because they cannot take their families with them.
The Select Committee visited Alfred Marks and learnt that the price payable for work processing skills was so far in excess of that payable for simple typewriting skills that it paid Alfred Marks to install a training programme so that temps could learn how to use word processors. Of course, the pay-off time is short, as is the training time, so everyone can see the immediate benefit. Indeed, I am sure that there is no need for the Government to intervene in that area.
§ Mr. Barry Sheerman (Huddersfield)
Is the hon. Gentleman not amazed that the Government should have introduced a new workers scheme in the Budget which gives such substantial subsidies to employers who employ young people without any strings being attached and without training being necessary? Those young people need not be trained throughout that period of employment.
§ Mr. Rowe
I am sympathetic to the Government as they are in a tremendous dilemma. If too many strings are attached to the provisions for young workers, employers just will not take them on. But I hope to argue that we should increase the incentive and, to some extent, the strings in order to make people accept responsibility for training. I wonder whether there is scope in some of the more difficult areas of training—where the pay-off is slower or the training is longer—for a tax benefit for upgrading skills. After all, we get tax benefits as individuals for upgrading our houses and for upgrading our pensions, so it is not entirely incongruous to try to work out a system of tax benefits for upgrading our skills, particularly in areas of skill shortages.
Furthermore, the means for much of that provision is at hand. I have spoken on this subject before, but I did not elicit any serious rejoinder. Nevertheless, I shall try again. Many people own home videos and so there is a great opportunity to use them for self improvement. The video tape is an extraordinary instrument, because it is expensive to make but incredibly cheap to copy. Moreover, it can be copied by transmission via the television set, and so can be copied anywhere. The Government should seriously consider establishing some means whereby a copyright-free training video programme could be introduced under the auspices of the Open University—which I know is of interest to the hon. Member for Huddersfield—or under the auspices of the Open Tech. That serious suggestion is worth taking up. It does not really matter whether people pirate those videos at home, but it is not on for teachers to pirate the copyright, and we should try to do something about that.
We need to know where our skills shortages are now and, as far as possible, where they are likely to be in future. That is a difficult but necessary task. We must 486 urgently tackle the problem of those shortages because the upswing in the economy, which we are all confident will arrive, will be strangled by such shortages. We can identify them now and we ought to be dealing with them on a crash basis.
Private gain is a difficult and complex subject. Substitution of private sector jobs by public subsidy jobs is a real danger, especially with the huge programmes being implemented by the Manpower Services Commission. There is, however, scope for more participation — for example, in the community programme—by private employers. At present only 2 per cent. of community programme schemes have private sector participation. I know that the MSC and the CBI are examining that. We must be bold in this matter. If private firms fight shy of inner city sites because of the level of dereliction, why should we abuse the community programme by bringing those sites up to a standard at which they would be attractive enough to the private sector to take them on? We should not be afraid of helping private firms to prosper. Rather we should be afraid that by using public money to subsidise some private firms they are then able to destroy others. That is a difficult balance to strike, but I believe that it is a priority area and I hope that the Government will address themselves to it.
The Budget has been very helpful for small firms. I am delighted at the continuation of the loan guarantee scheme. I played a small part in its introduction. It was proposed in the face of considerable scepticism from the banks and others. It has played a major role in launching small firms and in educating the financial institutions about the importance of the small firms sector.
I welcome the continuation of the business expansion scheme on a permanent basis. However, I am sorry that there has not been a bold move on training for small firms. I still do not understand why the financial institutions, particularly the clearing banks, take so little interest in the training record of their debtors. They value the machinery, the property and the owner's home, but they do nothing to value the quality of the staff, which is the most expensive item.
My suggestions for personal tax relief for individuals could perhaps be paralleled by a tax relief for companies with a good training record. I am tired of financial institutions pleading that it is not their job to play any role in improving the quality of management in the businesses to which they lend money. If it is not their job, whose job is it? They have access to the firms and power over them. For them to say that they do not understand enough about the running of small businesses to help them is a dereliction of duty.
I shall take the Minister close to home. Small firms complain bitterly about their customers' slowness in paying bills. That has a direct effect on their ability to employ staff. I must tell the Government that the Government Departments are often as bad at that as anyone else. If codes of conduct or letters of encouragement do not improve the situation, should we not try penalties?
We have heard about vacant properties and unused land, but I remind the Government that the DOE survey shows that central Government have the largest number of longstanding vacant properties and still own a huge property bank. These matters are under the direct control 487 of the Treasury as the establishment officer for the Civil Service. I hope that my right hon. Friend will do everything to ensure that the Treasury exercises that duty.
§ Mr. Deputy Speaker (Sir Paul Dean)
Order. The winding-up speeches are expected to begin at about 9.20 pm. At least six hon. Members still wish to speak, and I hope that speeches will be brief so that all those hon. Members can make their contributions before the Front Bench speeches begin.
§ Mr. Don Dixon (Jarrow)
I apologise for having missed the opening speeches, but I was delayed in Committee Room 12 dealing with that paltry, squalid little Bill that the Government introduced, the Wages Bill. It is aimed at those at the bottom of the wages ladder, and is more or less in line with the theme of the Budget proposals.
I shall follow the line adopted by my hon. Friend the Member for Bradford, West (Mr. Madden) who spoke about our region, the northern region, which over the past eight years has suffered because of restructuring, unemployment and, now, the social problems that have been caused by many of the Government's policies. For example, the northern region has lost 230,000 jobs over the past eight years, which is 18 per cent., or almost one in five of employees. Some 34 per cent. of manufacturing jobs have been lost, which totals 146,000 jobs. That means that one in three of the work force employed in the manufacturing industry have lost their jobs. A total of 50 per cent. of construction jobs have been lost, and house building is down by 50 per cent. Public sector house building has been reduced by two thirds and road construction works are being delayed. However, there are thousands of construction workers on the dole. Ours is one of the only regions to have suffered a decline in service employment. In 1984 9,000 fewer people were employed in the service industries in the northern region than in 1977.
The Chancellor could have done something to alleviate the problems in the northern region with the £935 million that he has given in tax concessions. He could have made sure that tourism there was improved. In 1983 the value of tourism in the northern region was £250 million. The Chancellor could have made sure that the regional tourist boards were allocated a significant increase in resources for marketing and development.
Total unemployment in the northern region has moved from 8 per cent. to 19 per cent. Male unemployment rose from 10 per cent. to 23 per cent., and the percentage of long-term unemployed has doubled. Of that long-term unemployed in the northern region, 29 per cent. are youngsters under 25 years of age. In my constituency 43.1 per cent. of the unemployed have been out of work for more than a year. Those 3,585 men and women have experienced the humiliation and despair of repeatedly being rejected for a place among the work force. There are 40–year-olds in my constituency who can see no future as they will be unable to get another job during their working lifetimes. That is the situation in the northern region and in my constituency, yet very little, if anything, has been done for them in the Budget. The Chancellor could have done so much with the £935 million to assist regions and constituencies such as mine instead of knocking a penny off the basic rate of income tax.
488 The worst unemployment black spots are in the northern region. The five worst in England—South Tyneside, Hartlepool, Middlesbrough, Bishop Auckland and Sunderland—are in the northern region. South Tyneside is the worst unemployment black spot in Great Britain. My hon. Friend the Member for South Shields (Dr. Clark) and I have repeatedly asked the Minister to redesignate South Tyneside, because of the high unemployment and the social problems, from a programmed authority to a partnership authority, but to no avail. There has been a 57 per cent. reduction in real terms in Government regional assistance to industry in the northern region, and average household incomes are the lowest in the United Kingdom.
The Budget has done nothing to help people in the northern region if one considers what the Chancellor has given in tax concessions. A married couple with a total income of £4,000 will be 67p a week better off, yet those with an income of £50,000 a year will be £8.79 a week better off. The Chancellor has made matters worse through his Budget.
The north-south divide is increasing every month under this Government. There are 23 redundancies per thousand in the northern region, whereas in the south-east there are only five for every thousand. In the south-east the unemployment rates in 1985 were 10 per cent., and in the northern region they were nearly double that at 19 per cent. The percentage of those who became unemployed between April and July was 6.5 per cent. for the northern region and in the south-east 3.9 per cent. The change in average weekly household incomes compared with the United Kingdom average between 1977 and 1985 was plus 4 per cent. for the south-east and minus 8 per cent. for the northern region.
Between 1976–77 and 1983–84 school-leavers going on to full-time education in the south-east rose by an average of 6 per cent,. and in the northern region fell by 29 per cent. Under this Government we have two nations. We have the north-south divide, which was so forcefully described by my hon. Friend the Member for Bradford, West.
Local authorities in the northern region which try to help to generate employment, even working with the private sector, are being severely hampered by the penal effects of the Government's block grant system.
In view of the huge restructuring that is taking place in the northern region, it is imperative that the remaining key industries such as steel, coal, shipbuilding, heavy engineering and machine tool manufacturing should be protected by the Government. It is nonsense that a shipyard worker should be put on the dole at a cost to the Treasury of £6,000 per annum when he could be kept in work building ships that are required. In that industry we are being outmanoeuvred by countries that subsidise their shipbuilding industries.
The Chancellor could have provided support for small firms in our region. Support is being restricted by the 40 per cent. EC limit on public sector support. In our area 30 per cent. of the work force is employed in small firms, as against 47 per cent. in the south-east.
The North of England County Councils Association has a conference tomorrow to announce its regional policy—the state-of-the-region report. The association has, since 1979, repeatedly asked the Government to do something for our region. We need a Minister of Cabinet rank to express the needs of the English assisted regions. 489 Why should the Scottish and the Welsh have a Secretary of State with Cabinet rank when the English regions have not? Why should we not have a Minister in the Cabinet to speak up for regional development and support?
There should be increased resources for infrastructure and support for the EC programmes, not as a substitute for them. There should be increased funding for new technology, telecommunications and research and development projects. There should be greater recognition of the region's needs in regional industrial policy. There should be special employment measures and support for training.
We lost the Killingworth skillcentre. The hon. Member for Mid-Kent (Mr. Rowe) talked about training. There is now no skillcentre between the Tyne and Edinburgh because of the Government's decision to close the Killingworth skillcentre. The dispersal of Government officers and research establishments to the region would assist the area. All those measures have been asked for over the years, but little has been done.
The Government should recognise the value of local authorities. Tyne and Wear, an effective job creation authority, has been abolished by the Government. Other local authorities are hampered by the block grant restrictions. There should be increased spending on housing and health facilities. The Black report pointed out that South Tyneside district council, in my constituency, was one of the 10 worst in the country, yet we are being starved of resources.
The housing investment programme allocation for South Tyneside this year is £6.5 million. To maintain the real value of 1979 it would have to be £27 million. Yet the local authority has £6.5 million to deal with all of its housing problems. Asbestos has been found in a block of flats for which the council has a modernisation programme which is due to be carried out next year. Because of the restriction on the money available for housing, the local authority cannot bring that programme forward to coincide with the work that has to be done to remove the asbestos.
The Chancellor and the Government could have done many things to help our region. It requires support more than any other region because of its particular problems, most of which are the result of the Government's policies. The other night during a debate on the EC, I suggested that the northern region should be treated as a priority area, because our social and unemployment problems are as bad as those in Northern Ireland, the only priority area in the United Kingdom. The Chancellor should have taken that into account in the Budget.
The Select Committee on Employment produced a good report on long-term unemployment. It put forward positive suggestions to help the 750,000 people who have lost hope and the will to work because they have been unemployed for so long. Yet that report has been ignored. Indeed, the Paymaster General tried to rubbish it before it was even officially published.
The Government could do many things rather than taking a penny off the standard rate of income tax in order to help the people in our area who are unemployed and deprived, which the Government apparently think nothing about.
§ Mr. Roger Freeman (Kettering)
I hope that the hon. Member for Jarrow (Mr. Dixon) will forgive me if I do not pursue his line of thinking about the northern region. It is not because I do not understand and sympathise with the unemployment problems in the north-east. My constituency in Northamptonshire is, comparatively, much more fortunate with an unemployment rate of only 9 per cent.
I want to concentrate my remarks on the taxation of savings and investment. I appreciate that for a person who has no job talk of the reform of taxation of savings and investment is not directly relevant. Nevertheless, I want to follow the comments of my hon. Friend the Member for Reigate (Mr. Gardiner) in commenting briefly tonight on the Budget's provisions for savings and investments.
I hope that my right hon. and learned Friend the Paymaster General will pursue with my right hon. Friend the Chancellor of the Exchequer the idea of discussions with industry on the introduction of profit-sharing schemes. That is crucial and could be important for employment prospects. I say that as a former employer. If we had the taxation incentive whereby part of the overall remuneration came in the way of a profit-sharing arrangement with the firm—a bonus pact—I am sure that an employer would be more flexible in taking on additional staff when times were better because the employer would not be building in the high fixed costs that can often follow if one has to pay comparatively high rates of standard pay plus overtime. I welcome that initiative. One route that my right hon. Friend might pursue is to limit the national insurance contributions for the employer and the employee to the basic salary, leaving some concession for the national insurance contribution on the profit share or bonus payment.
I welcome the Budget as being another step in the right direction towards share ownership. By that I mean not only the broader spread of the ownership of assets in Britain but the direct control of those assets by individuals rather than through institutions.
The privatisation of British Telecom was a marvellous opportunity, which has been fulfilled, in the spread of ownership of shares. I hope that some of the reforms—two in particular—will encourage that process even further. I welcome the reduction in stamp duty from 1 per cent. to 0.5 per cent. Next year, I hope that the Chancellor will abolish it. It is a tax on savings, investment and trading. I do not believe that it should have a permanent place in the Chancellor's armoury of taxation. Many investors—now, fortunately, without exchange control—can make investments in other markets and in other exchanges where there is no stamp duty.
I welcome the personal equity plan, although I agree with the suggestion of my hon. Friend the Member for Reigate that, instead of allowing a husband and wife a concession of £4,800 a year of investment in a personal equity plan and the capital gains and dividends income rolling out tax-free, a more modest concession of £500 of investment, could be made out of pre-tax income similar to the Loi Monory. That would have a more direct beneficial effect on the spread of share ownership. Nevertheless, the proposals in the Budget are welcome.
I notice from the Red Book, when trying to calculate what the officials have estimated the take-up rate will be in the fiscal year 1987–88, that the constant of the scheme 491 is shown at £25 million for the full tax year. I have calculated, making modest assumptions about dividend yield and rates of taxation on the individuals who take part, that it is equivalent to £1 billion worth of equity investment. That could account for perhaps 500,000 new shareholders with a concession of say £2,000 worth of investment per annum. They are large numbers and I hope the plan is successful.
We are in the grey period between the Budget debate and the Finance Bill. I hope that we will have the First Reading of the Finance Bill as soon as possible to enable not only the House but those interested outside to make their comments in good time for the Second Reading and Committee. I ask the Minister to consider seriously, if we are to encourage the monthly deduction from the payroll of payments into personal equity plans, tax relief on interest earned on amounts deposited until they are invested. Otherwise it could be a disincentive. A sum of £200, £100 or £50 a month will take some time to build up before a sensible share purchase can be made. Perhaps we have many constituents who applied for the 800 allotment of British Telecom shares. That is £2,000. It therefore will take time for the individual to build up his cash reserves in a personal equity plan before he can make a sensible direct equity investment. Otherwise the expense of buying shares in smaller tranches could be prohibitive.
When the Minister is drafting the Finance Bill, will he please ensure that no relief is given if the individual makes his investment through a unit trust or institution? The relief should be for individuals who invest directly in equity shares. That is what we want to encourage, and not investment through institutions.
The business expansion scheme relates to the flow of savings and investment. I have taken some time to study the voluminous report from Peat Marwick. It is an excellent report and it gives justification for the Chancellor to proceed to extend the business expansion scheme indefinitely. The report shows that there has been incremental equity investment and it justifies the scheme and its relatively generous tax concessions.
I feel strongly that we have not made enough progress with the encouragement of what I call local syndicates on a county, town or metropolitan basis. The syndicates would encourage local investors to claim tax relief and invest in local business. Local investors often know which local businesses are likely to thrive. I would like to see some guidance either from the Department of Trade and Industry or the Treasury to local enterprise agencies. About 200 have already been set up in the country, including one in my own constituency. There should be some guidance to those agencies on the practical steps that should be taken to set up local syndicates.
The Chancellor encouraged industry to invest more in research and development. I was pleased to see that in the Finance Act 1985 there were concessions to encourage business expansion schemes to invest in research and development projects. I think we should go further. There is no magic in the £40,000 worth of relief but perhaps the business expansion schemes could invest that sum in research and development projects. The money should be directed into high technology and high-risk projects. The Government might consider lifting the ceiling of £40,000 to encourage more money to flow into research and development.
492 I welcome the Budget. I think that it is imaginative, and I think it will promote what the Chancellor called the enterprise culture. It is good for jobs but it is especially good for wider share ownership.
§ Mr. Ray Powell (Ogmore)
I cannot echo the praise of the hon. Member for Kettering (Mr. Freeman) for the Budget. He obviously does not represent a constituency like mine in south Wales. If he did, he would not be talking about his constituents looking for shares in British Telecom. Most of my constituents are looking for sufficient money to exist on. The reason for that is the massive unemployment which has been created in the past seven years of Tory government.
I am sympathetic to my hon. Friend the Member for Jarrow (Mr. Dixon). I enjoyed his speech very much. I should not like him to assume that perhaps by having a Secretary of State for the northern region, as we have a Secretary of State for Wales, his region would benefit. In fact, he would find, as we have done with the Welsh Development Agency and the Secretary of State for Wales, that the region was worse off.
In 1979, the unemployment percentage for the whole of the Port Talbot travel-to-work area was 3.7 per cent. It is now 20 per cent. In one area of my constituency, Maesteg, male unemployment is 40 per cent. How has this come about since 1979? We have had demanning at Margam steelworks near Maesteg and there has been the closure of a number of collieries. In 1980 the Caerau colliery was closed, and in 1981 the Coegnant colliery was closed. Since the miners strike, St. John's colliery in Llynfi valley has closed. That is only one of the four valleys that comprise my constituency. Since the end of the miners strike, in Garw valley the Garw-Fylaldu colliery has closed. In the Ogmore valley we have had the closure of the Wyndham Western colliery. In recent weeks the last link of the Ogmore constituency with the mining industry has been severed with the closure of the Coed-Ely colliery. Since the end of the miners strike, we have lost 1,500 jobs, together with all the supportive industry jobs which were lost in conjunction with those closures.
All this has combined with the closure of factories on the Bridgend estate, together with bankruptcies and other matters which have caused businesses to close. To this is added the cut in revenue for local authorities and the compelled reductions in services such as social services. In the Ogmore area there are still 2,500 people waiting for housing. We are looking for sheltered accommodation for the elderly. All those services have been drastically reduced because of the Government's financial policies.
Hospital services in the whole of Mid Glamorgan have been severely cut. I understand that there is an abundance of doctors, qualified nurses and experienced personnel in a variety of supportive roles who are all out of work. They are all seeking employment but no jobs are available for them; yet the Mid Glamorgan health authority has announced that it is 1,000 nurses short in the area. The social work and essential services necessary for the old, disabled and disadvantaged have all been abandoned to the whim of the grocer's daughter.
Where is there in the Budget any compassion or sign of caring for people? What action is included to reduce the unacceptable figure of 3.5 million unemployed to a level that we would assume was reasonable—back to the 493 1979 figure in the Ogmore constituency and the travel-to-work area of the Ogwr borough and Port Talbot? What a blessing it would be for the 8,000 people in my area who are out of work if we could return to the 1979 figure.
Nevertheless, I welcome the extension of aid, limited though it is, to the MSC's community programme schemes. Even the increase in the average wage from £65 to £67—a meagre £2 increase—is acceptable. It will help some of the administrators to extend slightly the scope of the schemes. A much more realistic figure would have been £80.
Of course, I welcome the measure as chairman of one of these successful schemes called community and training in Ogwr. It provides for about 450 places this year and the number is steadily increasing. I have some knowledge of the people applying for jobs especially in the construction industry, because I have interviewed bricklayers, floorlayers, plasterers, painters, plumbers, electricians, architects, buyers, and planners—every conceivable professional or technical person required to build what we need in the construction industry. I have interviewed them. There are thousands of such people in my area alone seeking employment.
We need to meet the demand. My right hon. Friend the shadow Chancellor and deputy Leader of the Opposition —the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley)—spelt out in detail only yesterday what Labour will do when we form the next Government. It is a matter of priorities. Everyone knows what they should be, but getting the country back to work is more important than anything else. We should be exploiting every sinew of Government responsibility to solve this appalling social curse. We should be rejecting the massive unemployment in the United Kingdom. Hon. Members on both sides of the House should recognise and appreciate the social upheavals it is causing. Young men in the prime of life are thrown out of work, without hope and without a future for themselves, their children, their grandchildren or even future generations.
Since the miners' strike, the coalfield communities campaign has been set up nationally. A Welsh section has been formed to bring organisations together to help the coalfield communities. My constituency desperately needs the assistance of the coalfield communities campaign and of the Government. The coalfield communities campaign has said that in Wales it is vitally concerned with those communities in the Principality which have lost the pits which provided basic resources and the basic source of employment. The campaign stated:Throughout this period of economic change …one fact remains constant, while the miners themselves may have received some financial consolation for their redundancy, the stranded Community gets no help at all.The Coalfield Communities in Wales have severe economic problems that are long standing and require investment over a number of years … it is in co-operation … between the Private and Public sectors that a policy and a programme should be provided for the economic, social and physical retention and regeneration of our Coalfield Communities.The campaign stated that the Government shouldprovide action on a massive scale involving major spending in the fields of communication, house building and environmental improvements.It referred tolong-standing difficulties of securing sufficient jobs for displaced coal-miners and their dependants within the constrained Valley areas and the traditionally high levels of 494 unemployment which … we have suffered and which are factors peculiar to the coalfield areas by comparison with the urban areas of England and Scotland.The campaign continued:the securing of alternative employment opportunities was beset with difficulties. The most serious result being, in my view, the loss of post-school training opportunities for youngsters. Traditional apprenticeships have disappeared and youngsters are not being recruited into employment in any great numbers.There are already 21 authorities in Wales participating in the Welsh campaign—16 district councils and five county councils—which together represent more than 2 million people.
The Welsh coalfield communities campaign made its main point to the Welsh group of the parliamentary Labour party. One councillor stated:
Our coalfield communities face very serious problems which are particularly severe if you compare us with the rest of Britain.I am most familiar with my own County and what I have to say is specifically about Mid Glamorgan … it is one of the most deprived counties in Britain, but you will see much the same difficulties in all Welsh coalfield communities.Our unemployment problems are severe. Almost one person in every five of our workforce claimed unemployment benefit in January. We believe the true rate of unemployment is probably more like one in four—rising well above that in some parts of the County. We are among the 6 worst counties in Britain.Our communities are plagued with ill-health. Death rates are the second highest in Britain and more people are permanently sick than anywhere else in the country. As a result more prescriptions are issued to each person than in any other Welsh county.Our housing is amongst the worst in Britain, with more houses without inside toilets than anywhere else …The environment our people live and work in is still badly scarred by over two centuries of mining and other industrial activities. Public infrastructure like schools and roads is old and desperately needs replacing or improving.All those problems are most severe in the mining communities in the valleys and are closely associated with the way the industry has developed and exploited the area.Putting matters right is enormously expensive and a programme of capital spending in Mid Glamorgan has recently been submitted to the European Regional Development Fund. It is limited to eligible projects on which we might hope to get a capital allocation from Central Government. Even so, it amounts to £77 million over four years.Mid Glamorgan's ability to commit resources to help overcome its difficulties is severely limited by the present Government's expenditure controls and by its own extremely weak rate base. We have the lowest rateable values in Britain.Government policies seem to us to favour the prosperous South and South East of England and, when they occasionally focus on poorer areas, it always seems to be the big cities that benefit. Well, we have a big city population in our valleys and our needs are every bit as great. Our potential to contribute to the nation's prosperity, given the right help, is probably greater.I could go on at some length on the problems which beset Mid Glamorgan and my constituency of Ogmore. I ask the Government to consider nine points which I should like to put to them. They are:
Recognition by Government of the special needs of the Coalfield Communities of Britain.Designation of Coalfield Community Action Zones as a means of focussing new policies and giving higher rates of Regional Grant and other support.An additional investment programme to improve the environment and modernise the public infrastructure in Coalfield Community Action Zones.A specific additional grant to Welsh Development Agency earmarked for land reclamation and major environmental schemes in the Welsh Coalfield Community Action Zones.An allocation of additional resources through RSG and capital allocations to the local authorities of the Coalfield Community Action Zones in Wales …A recognition by NCB and the Government that the scale of the problem is not reflected in the scale and scope of the funding and activities of NCB (Enterprise) Ltd. We would particularly 495 like to see NCB (Enterprise) given more support in the form of grants, providing venture capital for new start ups and widening its support towards training beyond ex-miners.A three year moratorium on colliery closures in Wales and a commitment to invest in a new colliery at Margam.A far more effective marketing of Welsh coal by NCB, reflecting its special qualities, and an extension of the Government's coal firing scheme to the public sector.A complete revision of the EEC's coal policies on the lines of the recommendations by the Labour Group of members of the European Parliament.The Budget has not even considered further prospects of employment within the area to which I have referred. My hon. Friend the Member for Newport, East (Mr. Hughes) mentioned the slogan of the Budget of my right hon. Friend the Member for Cardiff, South and Penarth (Mr. Callaghan) some years ago, "Steady as she goes". My hon. Friend said on Tuesday that this Budget could be given the slogan "Steady as she sinks".
§ 9.3 pm
§ Sir Brandon Rhys Williams (Kensington)
There are many excellent features in the Budget and I should like to give a personal welcome to the reconsideration of the tax position of occupational pension funds. I hope that I am right in expecting that this will at last prove a decisive move in the direction of full transferability of all accrued pension rights.
I want briefly to express some concern about the general Budget strategy. I am worried about its impact on the serious development in this country—the reappearance of the division of the nation into haves and have-nots. I think that there are two aspects of that problem which we can discern in the Budget. First, there is what I would call the cult of the equity, which we see in the otherwise excellent plan for the PEP. I wonder why it is necessary to confine that project to investment in equities only. I think that the decision should be reconsidered, because it seems to be against a discernible trend in the direction of management buy-outs, worker participation, employee shareholdings and the generally increased perception of the advantages of allowing workers to receive a larger share of their remuneration through the performance of the business rather than their wages. Other classes of share such as convertible debentures, value added loan stocks, dynamised debentures, participating preferences and perhaps other experimental forms of investor participation ought to be encouraged as well. I hope that my right hon. and hon. Friends will consider this point.
I should like to see what on the continent is known as the historic compromise: a closer relationship between workers and investors and a greater recognition of their absolute identity of interest. I have said in the House before—I think that I shocked people when I said it, but I shall repeat it now—that we are moving towards a time when workers will give up their right to strike and investors will give up their claim to an equity dividend. This may lie some way ahead, but we should prepare for moves towards greater harmony and better relations between investors and workers. The "two sides in industry" concept ought not to be allowed to continue. Marx may have had a point when he saidThe profit belongs to the workersbut of course a fair return belongs to the investors, too. Otherwise there will be no profits and, sooner or later, no workers either.
496 However that may be, I think that the historic compromise in the creation of wealth and the end of the game of "Normans and Saxons" should be a particular mission of the Conservative party. I hope, therefore, that the PEP scheme, which I believe is destined to have a very great success, should be extended to other classes of share besides equities.
I should like to say a few words about the increasing division between those in work and those in need in our society. We now have 8 million people on supplementary benefit. That is a very large number and, unfortunately, it seems to me that as a result of the reforms of the rating system which the Government have in mind—and which I fully support—and also as a result of the impact of the Social Security Bill which is now in Standing Committee, it is likely to rise. If it is implemented as it stands, with the emphasis so strongly on needs-related benefit and, unfortunately, inadequate provision for contribution-related benefits and neglect of the scope for benefits founded on citizenship as of right, I am afraid that the division between those in work and those in need in Britain will become even more marked. Every civilised community has to strike a balance between unity and freedom: the unity of the community and the freedom of the individual. That is what politics is all about.
In a modern society where our mutual relationships are so widely expressed in terms of cash, the Budget is an important indicator, a determinant of the balance between the scope which our economy provides for the pursuit of selfish aims—making our own choices—and the power of the various systems and social institutions by which we bear one another's burdens. I am not convinced that the Chancellor of the Exchequer is wise to commit himself to a reduction in the rate of income tax to 25p in the pound and to move in that direction this year by a reduction of 1p in the pound in the taxation of income. I should have preferred that the resources he has chosen to deny to the Departments should have been dispersed in a less random fashion and in a way that would have promoted the unity of the nation rather than its division.
Lastly, I would like to refer to the Chancellor's Green Paper on the reform of personal taxation. It adds to my sense of uneasiness. In 1974 the Conservative party committed itself to the tax credit scheme, though not entirely in the form that I personally would have chosen, and the commitment was repeated in 1979 in the first general election manifesto that emanated from my right hon. Friend the Prime Minister. But the Green Paper is plainly intended to kill the idea of tax credits stone dead. I am currently serving on the Standing Committee on the Social Security Bill, and as we progress through its clauses I become more and more deeply convinced that the stone that the builder is seeking to reject in 1986—the concept of a tax credit scheme, or what I call the BIG idea, the basic income guarantee—will, before very long, become the head of the corner in our system for the redistribution of income.
§ 9.4 pm
§ Mr. Frank Haynes (Ashfield)
First, I must apologise for not having been in the Chamber for very long. I have been in Standing Committee all day on the Social Security Bill. However, I want to make a small contribution to the debate. I heard the Paymaster General's speech this afternoon. He is a Member of Parliament for an east midlands constituency, which is just down the road from 497 mine. His contribution in Government has been to cut and cut again. He supported similar policies as Minister for Health when we were trying to formulate a policy for a district general hospital. The project got off the ground, but then he imposed cuts and delayed the programme for two years, and jobs went in the process.
Now we have another Budget. The Chancellor suggested that the 7.5p increase in the price of petrol should be absorbed by the petrol companies. They have already given him their answer—they are not prepared to do it. The result is that the increase is to be added to the price. As everybody realises, an increase in the price of petrol means an increase in the prices of commodities which have to be transported, and that will no doubt be reflected in the prices of commodities in the shops. At the weekend I go shopping with my wife fairly regularly, and I notice that prices continue increasing, and never decrease. Nor will they decrease in spite of the reduction in the price of oil, because that cut is not being passed on to the consumer as it should be. The big oil companies are raking off massive profits, yet the Chancellor is prepared to let that continue and not to do a great deal about it.
The Chancellor has missed a real opportunity to reduce unemployment. Every constituency suffers from unemployment, some more than others. There has been a dramatic increase in unemployment in my constituency since 1979, and it continues to rise. I remember in 1979 when the Chancellor of the day gave a massive reduction in income tax to the rich. The Prime Minister, when questioned at the first Prime Minister's questions after that reduction, said that all the money that was being given back would be invested in industry so that industry would expand and jobs would be created, but it has gone the other way. When the restrictions were removed, money flowed out of the country to places where the pickings were richer than in the United Kingdom. The result was massive unemployment, and the level of unemployment continues to rise and cause misery in our constituencies.
Many changes are taking place as a result of the Government's policies. In Committee on the Social Security Bill, the Government have said that they want child benefit paid into the man's pay pocket. That is scandalous. That money belongs to the person who looks after the child, and in the main that is the mother. When the Labour party was in power, it made sure that the mother received the child benefit. Now, however, the system is being reversed. It will be put into the man's pay packet, and many women will be denied that money in future. We all know what happens, and that is why the Labour party when in office changed the rules.
I recall the comment of the hon. Member for Mid-Sussex (Mr. Renton)—I am glad that he has come back into the Chamber—about ensuring that business has proper training programmes. I think that the hon. Member has a nerve. His party has been in office for almost seven years, and has not done a great deal about training except that the Government got frit, they realised that people were not very pleased with what they were doing and they rushed into a youth opportunity programme that was cheap labour, using youngsters on adult jobs. The £25 paid by the Government was the only money that those youngsters got for the work they did. The Government brought in other schemes but they only provide cheap labour. We want a proper training programme. The Government are 498 late in bringing forward proposals. The people have got the message on unemployment. The training that would enable people to be ready for jobs when the economy improved has not been provided for.
The Government have done a wicked job on education. They talk about skill training and places in universities. Now, by cutting student grants, they are making parents pay. The people who can least afford it have to pay for their children to go to university. Is it any wonder that we get massive lobbies of parents and students to tell us what they feel about Government policy on education?
I have no good words for the Budget. It will not help many of my constituents in Ashfield in Nottinghamshire. When I go home this weekend, my constituents will give me the message at my surgery that they do not accept the Budget either.
§ Mr. Alan Howarth (Stratford-on-Avon)
It is the mark of a creative Chancellor that against a background of having lost enormous income which he might have expected from tax revenues, and finding himself with very little room for manoeuvre, he has nonetheless managed to spread good cheer throughout the country, other than on the Opposition Benches, and he has managed to lead the country in constructive directions.
This is a Budget for enterprise and responsibility. We should note first, however, that his macro-economic strategy has been overwhelmingly endorsed by the markets. Before we have voted on the Budget the markets have given an enormous vote of approval to the Chancellor's measures and strategy. That is because he has been prudent in his overall fiscal policy. Against the background of the erratic behaviour of sterling M3, the situation has been particularly difficult. Therefore, the Chancellor has been right to take the cautious path on the public sector borrowing requirement. He has been vindicated by the response of the market, by the fall in interest rates, and by the resilience and positive strength of the pound.
The Labour party proposes to spend £24 billion additionally. Heaven knows what would happen to interest rates and to sterling if that seemed a credible and realistic prospect. I listened with great interest to the hon. Member for Stockton. South (Mr. Wrigglesworth). The alliance, too, proposes to spend more. I was puzzled by some public statement by alliance spokesmen recently, when they said that. unfortunately, because of falling oil prices, they could no longer create so many new jobs through their proposed budget. They seemed to suppose that it is politicians and not businesses who create jobs.
The fall in oil prices has been a massive benefit to the economy overall. There has been a tremendous drop in the input costs of business. Along with that we have seen a fall in the pound and, because of the background of good financial management, interest rates have come down. So we must congratulate the Government on having ensured that the economy is in such good shape that it is able to take the greatest advantage of the new circumstances, which could have been very difficult to cope with.
Not only has the falling oil price reduced industrial costs, but the Government have been able to reduce the overall tax burden.
It is a Budget for enterprise. The introduction of the personal equity plan is an exciting prospect. Because mortgage interest rates are coming down people will have 499 more money to put into the new investment opportunity. We must be wary and ensure that the plans do not involve excessive administrative costs. We must also be careful about encouraging investors to put more than they can afford into individual stocks. I certainly wish the scheme well although, with time, it may need development and refinement. It is very much a move in the right direction, as is the Government's intention to explore the possibility of profit sharing, which would do so much to end the adversarial style of industrial relations, which has been so dismally characteristic in our national life, and which seems to be the sole, backward looking, stale vision of the Opposition.
This is a Budget for responsibility, and I welcome the initiatives taken to promote charitable giving. That will be of benefit in not only releasing a whole range of resources and energies complementary to the statutory and bureaucratic welfare system, but could be immensely beneficial to training in encouraging firms to give direct charity funding.
With the vote of confidence that the markets have given, with lower taxes, with the incentive to enterprise and responsibility that the Chancellor's Budget has allowed us, Britain faces an encouraging future and significantly improved prospects for employment.
§ Mr. Tony Blair (Sedgefield)
The hon. Member for Stratford-on-Avon (Mr. Howarth) said that this is a creative Budget that has been welcomed by the City. We need not a creative Chancellor for the City, but an effective Chancellor for the unemployed.
This is a Budget designed not for the regeneration of Britain, but for the regeneration of the Conservative party. On neither count will it succeed. Whereas the latter is a problem for Conservative Members, the former is a problem for the whole country. From tax cuts which benefit the wealthiest to an assortment of schemes whose principal feature is their utter insignificance to this country's problems, this is a Budget that does not address our difficulties, but ignores them. It will chiefly be remembered as the Budget which expresses the Government's final word on the unemployed—"You are on your own". This Government no longer see their responsibility in an economic sense, for the unemployed, but see unemployment as simply a social or human problem. I am not sure whether the Paymaster General was disclaiming or avowing the Tory Reform Group proposals earlier. When we look at what it says, we can see that there is a considerable consensus of opinion, not merely on this side of the House, but crossing the House, that it is a central role of Government—and not just the free market—to address the problems of unemployment. The real argument between this Government and so much of the country is that we see the role of Government as central to curing unemployment, whereas the Government see their role as incidental. The unemployed will get a lot of caring, but very little capital.
Last year's Budget was said to be a Budget for jobs, and unemployment rose. This year, not even the pretence has remained. It may be true that one cannot measure priorities simply by the amount of money spent, but it is some guide to priorities. When we consider that the net cost of the Government's employment measures is one-tenth of the give away in tax handouts, that shows us the measure of 500 priority that this Government has towards the unemployed. We should strip away the rhetoric and get down to reality when we examine all the Government schemes.
We heard many comments from Conservative Members about the personal equity plan. The hon. Member for Stockton, South (Mr. Wrigglesworth) welcomed the plan without qualification; a position which is inconsistent with the position taken by the hon. Member for Berwick-upon-Tweed (Mr. Beith), who said that the plan amounts more or less to a con trick. Perhaps that is not unusual with 'the alliance. Let us examine the reality of this personal equity plan against the claims that are made for it in the Budget.
It is claimed that the personal equity plan will extend share ownership, and it will give first-time shareholders, the ordinary man in the street, the right to invest in shares so that they will benefit from the scheme. Further, it is said that it is to be seen in the same light as council house sales, so that the person who bought his council house will now invest money in shares.
Let us examine for a moment who will benefit under this personal equity plan. First of all, let us blow away some of the puff that has surrounded the plan. The hon. Member for Kettering (Mr. Freeman) and others might be forgiven, if they simply read the popular press, for thinking that the personal equity plan gives some sort of tax break when entering the plan, so that the money put into the plan would be taken out of pre-tax income. However, it is only to money out of taxed income that the plan applies, and if one wants to get the full benefit of the plan, one will have to have £200 a month out of one's taxed income lying spare. I do not know how many Conservative Members have constituents in that position, but Labour Members have few.
Secondly, tax incentives are given first on capital gains tax, and secondly on dividends. The capital gains incentive should be seen in the context that the maximum that can be put in to the personal equity plan is £2,400 a year. It will take years for any one putting in even £2,400 a year in a personal equity plan to yield capital gains on the sale of those shares, which will require relief up to the capital gains maximum of £6,300 a year. It will take several years, even if a person is putting in the full £2,400 a year, before he gets to the stage at which there is a benefit on capital gains tax.
The tax relief given on dividends is a relief only on dividend income that is put back in to buy further shares. Let us take a basic rate taxpayer, remembering that this plan has been sold as the ordinary man in the street's ability to buy shares. Supposing he puts in £2,400 in the first year. If we take the Government's figures, his dividend will be £120 to £150 a year. He will be paying about £40 a year in income tax on that. He can then reinvest that £40. The sole benefit that he gets out of his £2,400 is the right to buy an extra £40 worth of shares and put them back into the plan. Out of that, he has to pay the scheme manager's charges.
I suggest that for the average basic rate taxpayer or man in the street, the gains from this scheme, except over a very long time, will be virtually negligible, but they are not the people who will use this scheme, because the important thing to remember about it is that it is available to existing shareholders. They will put money into the scheme and every broker handling any substantial portfolio will be shoving money into the scheme because it is a tax-free shelter. For example, when the amount of their other investments means that they may be liable for 501 capital gains tax, this is a way to ensure that they minimise that tax liability. The money can be put into the tax-free shelter and kept there, giving capital gains benefits while retaining the full amount of the £6,300 limit each year on capital gains tax on other investments.
The top rate taxpayer who puts money into the scheme when he gets his rebate on the dividends that he uses to reinvest in shares will be getting double what the basic rate taxpayer is getting. If that is taken in conjunction with the changes in capital transfer tax, which means that lifetime gifts are no longer taxable, that person could give money to his wife, children and family and put it into the tax free scheme. Considerable sums of money will be put into the tax free shelters, not by first time buyers or the man in the street, but by holders of already substantial holdings and those on the top rate incomes.
I do not mind schemes for wider share ownership being put forward by the Government. What I do mind is their being presented as schemes for the ordinary man in the street when they are nothing of the sort. It is not people's capitalism; it is top people's capitalism.
§ Mr. Blair
I will be even more generous with the hon. Gentleman. Why, if this is a scheme for first-time buyers, is it not restricted to first-time buyers of shares? The answer is that those who will benefit are those with substantial holdings.
That kind of sleight of hand—and it is sleight of hand—governed the Chancellor's remarks, particularly about the effect of the decline in oil revenues upon our economy. He said that if we could survive the loss of half our oil revenues in 25 weeks, this should make us feel perfectly complacent about the loss of the other half over 25 years. There were great trumpetings of "Hear, hear" from the Government Benches when he made that remark. Indeed, the hon. Member for Mid-Kent (Mr. Rowe), in an otherwise good and interesting speech, seemed to suggest that the Chancellor was absolutely justified in making that statement.
In fact, as the Chancellor well knows—and I hope that the Economic Secretary will answer this point in winding up—when he says that we have easily survived the loss of half our oil revenues and why should we not continue to show concern and then pours scorn on the report from another place he is deliberately eliding two things. The first is a drop in world oil prices, which may deplete our revenues but also gives a major supply-side boost to the economy and has all sorts of good counter-inflationary effects of boosting growth, and so on—in other words, as he said, has pluses and minuses. That is one thing. It is quite another thing to have a drop in British oil production, which is a minus for Britain because it is losing it the export earnings from oil, but has no plus because it has an immediate adverse consequence on our balance of payments. That is why the remarks made in the report from another place hold good. The Chancellor, as he well knows, was making a wholly false point.
The testing time for our balance of payments is not very far away. If hon. Members really think that the Government are looking at the long term rather than the short term, they should look at where the figures on our balance of payments are leading us. The figures show that 502 even in the first half of 1987 the current account surplus will be down from an annual rate of some £3.5 billion to an annual rate closer to £1.5 billion.
If we look at page 27 of the Red Book, for example, we see that in fact the significant forecast is that growth in imports of manufactures in 1986 will be over 7 per cent., twice as fast as domestic demand growth. That is the problem that we are going to be facing, and facing soon.
The same type of nonsense—and it really is nonsense—is demonstrated when we discuss the general pattern of the British economy. We have had it again today—how rosy the British economy is and the Paymaster General saying that there is really nothing that we should worry about. But if we look at the Government's record we see a rather different picture.
I shall not go over the figures again—I have done that several times in debates such as this—but the truth of the matter is that whenever the Government talk about how the economy is doing they talk as if they came to power in 1981. They forget that they were in power from 1979 to 1981, when the industrial base of our economy suffered extraordinary damage very largely as a result of Government policy. We must start from the base of 1979 to show the sort of growth trends over the past four or five years. This is shown by the fact that manufacturing output is barely at 1979 levels and manufacturing investment is still way down.
It is that refusal even to acknowledge that there is a problem that is so wilful about the way in which the Government set out on their economic policy. It would be easier if we could acknowledge what the problem was and simply debate the remedies. The difficulty with the Government is that one must spend considerable time persuading them that there is a problem in the British economy.
If our oil revenues had increased, that would have added a further dimension to the parody of reality which is the Government's economic thinking. If we had had those oil revenues, the Government would have used them for tax cuts. The Budget that we did not have is every bit as bad as the Budget that we had. The Government's priority would have been for tax cuts. With 4 million unemployed, growing poverty, crumbling housing and infrastructure, and the desperate position in our inner cities, how can any reasonable person think that the priority is to cut taxes? Yet that is the priority at the heart of Government policy.
We know how next year's tax cuts will be paid. We know that the Government will give us tax cuts, and why. They will give us tax cuts in advance of the general election. That will be the bonanza — the pre-election spree. How will they finance them without oil revenues? They will probably flog off British Gas at an undervalue. So the £4.75 billion from that will pay for £4.75 billion worth of tax cuts. It is impossible to think of a more irresponsible way of running the nation's economy.
It is interesting that everything is geared up to the short term. The only principle that governs Government policy is the principle of expediency. It has been elevated to become the Government's sole principle. When one considers manufacturing industry and selling assets, it is illuminating to consider the Government's remedies when those problems finally catch up with us. One of the most important points in the report of the House of Lords Select Committee on Overseas Trade was the Treasury's view 503 about what should happen when North sea oil production declines. The Treasury believes that there should be an adjustment in the exchange rate. In other words, the exchange rate should be allowed to fall. That is the very thing that the Government have been refusing to allow to happen throughout last year, keeping interest rates high because of the inflationary impact. Yet that is what the Government advocate when the decline in North sea oil production catches up with them. In exactly the same way, when asset sales decline, the Government advocate an increase in borrowing. Yet at present they tell us that that would be irresponsible. We in the Labour party do not believe, addressing the long term, that those decisions can be postponed any longer.
The Government must play a role in the reinvigoration of the British economy. The Chancellor admits that in the international sphere it is right for Governments to intervene and to be active in regulating the international monetary system. In exactly the same way, I ask the Government to abandon this free market nonsense in our domestic economy. It is as if they believe that the problems of the 1980s can be solved by the remedies of the 1780s. To realise the importance of their role, we have only to look at what Government could do, for example, in research and development, education and training.
Our research and development will fall in real terms while that of our competitors is constantly rising. Scientific research is either staying level or perhaps slightly declining, while our competitor countries are increasing it by 20 or 30 per cent. Those are the implications of present Government policies.
There is one further implication and it is perhaps the most important of all. As I said before, the Government virtually accept that they will carry 4 million unemployed into the next election. In effect, they now budget for two Britains. I think of the time when someone of my generation will be the average age of the members of the Cabinet. That is a long way off, in the year 2010, but I wonder if it is contemplated that we should carry 4 million unemployed until that time.
A cynical electoral calculation lies at the heart of Government policies. The Government believe that if there are sufficient votes from people who are relatively well paid and in work they can abandon the rest. People who think that are not merely morally wrong but socially dangerous because if 30 to 40 per cent. of our population is cut adrift we will end up threatening democracy. Britain cannot be unified until our priorities change. Unfortunately, there will be no change in priorities until there is a change of Government.
§ The Economic Secretary to the Treasury (Mr. Ian Stewart)
This Budget comes at the end of a period of five years of continuous growth. It also comes at a time when international conditions have been unusually disturbed because of the sharp fall in the oil price and the movement of foreign currencies and so on. I heard what the hon. Member for Sedgefield (Mr. Blair) said about the consequences of a drop in oil production. I shall have to read his speech tomorrow, because I could not entirely follow his argument. It seems to me that the Labour party is rather disappointed that the economy was not knocked sideways when such a substantial part of the Government's revenue fell away because of the fall in the oil price.
504 It is right at this time that we should have a cautious and careful Budget and one which does not put too much strain on the markets by over-borrowing. As we were reminded this afternoon, on Monday the Leader of the Opposition said that the Government had borrowed £60 billion in their first five years compared with borrowing by the last Labour Government of £40 billion in the five-year period when they were in office. The right hon. Gentleman is both wrong and misleading. He is wrong because we have borrowed only £50 billion, even in nominal terms, and he is misleading because at today's prices Labour borrowed twice as much.
As a proportion of the gross domestic product, Labour borrowed twice as much in five years as the Conservatives have borrowed in seven years. If borrowing were now as high a proportion of GDP as it was in 1976, the public sector borrowing requirement for the current year would not be around £7 billion but £33 billion or 9.25 per cent. of GDP. The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) spoke about the scope for raising the PSBR and I suppose that is the sort of figure he had in mind. The right hon. Gentleman was an economic Minister at the time. Does he now repudiate the actions of the Government of which he was a member?
There is no doubt about what would have happened if there had been a large increase in the PSBR. We should certainly not now be seeing a fall in interest rates or in inflation. Instead, massive increases would be in prospect. As my hon. Friend the Member for Stratford-on-Avon (Mr. Howarth) said, the Budget has been received as an act of confidence by a reduction in interest rates. The 1 per cent. reduction has been estimated by the CBI to save British industry about £250 million per year, and the reduction in mortgage rates announced over the last two days by several major building societies will provide an additional benefit to millions of families buying their homes. The combined benefits of the Budget and the reduction in mortgage rates to the average family with two children and a typical outstanding mortgage of £15,000 amount to £3.76 a week.
We are already seeing the benefits of a steady reduction in the PSBR in declining interest rates. This year, the PSBR, as a proportion of GDP, will be the lowest for the past 14 years and it is no coincidence that long-term interest rates have now fallen below 10 per cent., and are at their lowest for many years. The end of overfunding as a policy instrument, which was announced by my right hon. Friend the Chancellor in October, will also ensure that a low borrowing requirement is fully reflected in low actual borrowing.
At this time of year it is customary to announce a funding "target" for national savings for the following financial year. Last October, my right hon. Friend the Chancellor announced that in future the Government's policy would be to borrow sufficient to fund the PSBR in each financial year. That means that there is now an overall net funding target of £7 billion for 1986–87. We have concluded that it is no longer appropriate to have a separate target for national savings within that total. Decisions about the best methods of funding will in future be made in the light of circumstances, including market conditions and the relative attractiveness and cost of different instruments.
National savings will continue to play a significant part in funding the PSBR. We will ensure that the attractiveness of national savings products to investors is 505 maintained. Our aim over the coming year will be to keep national savings rates broadly competitive with other rates available to personal savers. In that context, I do not propose any immediate changes in national savings rates.
The Budget has brought again to the forefront of British politics the question of the basic rate of income tax. It is remarkable how Opposition Members have been put out by the fact that, despite the constraints of the current situation, my right hon. Friend the Chancellor has been able, in his Budget, to make a further reduction in the basic rate. We have now brought it down from 33p in the pound, which we inherited from Labour, to 29p in the pound today. It is our aspiration to reach a basic rate of 25p, but in reducing it from 33p to 29p we are already halfway there. Hon. Members such as the hon. Members for Bradford, West (Mr. Madden) and for Burnley (Mr. Pike) said that there was nothing in the Budget for any of their constituents. However, 24 million out of 25 million taxpayers in this country have a marginal rate of tax at the basic rate. We have raised the threshold for the starting point for tax by more than 20 per cent. after allowing for inflation, whereas the Labour Government reduced the starting threshold by 5 per cent. for a married man and 20 per cent. for a single man. Conservative Members should not take anything from them about helping those on lower incomes. That is the sort of nonsense that the Opposition peddle.
§ Mr. Stewart
We have raised the tax threshold and reduced the rate. The hon. Gentleman is really saying that people are better off under the Conservative Government, because those on higher incomes pay more taxes. I am glad to have that confirmation of the consequence of our Budget.
The right hon. Member for Sparkbrook made great play of the fact that a Labour Government would spend a lot of money on helping various members of society. He said that he would have to spend £3.5 billion in that connection. Where would that money come from? The answer is the higher paid and the rich. He said—and I hope that we can trust him—that he would not raise the basic rate of income tax. He said that when the basic rate of income tax was 30p in the pound. I hope that it still holds now that it is 29p in the pound. I shall give way if the hon. Member for Sedgefield wants to answer that point. He cannot answer it, however, and that is significant. The Labour party is not prepared to give a commitment to not raising the basic rate of income tax.
The Opposition have said that they will raise about half of the £3.5 billion which they want as extra spend for benefits by dealing with the higher rates of tax. I would like to give an example to Opposition Members of what that might mean. Supposing the Opposition were to impose a higher rate of 80 per cent. that would have to be placed on a taxable income of £22,800.
§ Mr. Stewart
That is where the process would have to start, if the Opposition were to leave the 40 per cent. and 506 45 per cent. thresholds unchanged. If the top rate of tax was to be no higher than 70 per cent., people would have to start paying it on a taxable income of £18,600. Is that a proper level of income to attract a rate of tax of 70 per cent? Alternatively, they could increase all the higher rates. If they did that, they would have to increase each level by 17 percentage points. The first high rate would not be 40p in the pound—
§ Mr. Stewart
Instead, the first higher rate would be 57p in the pound. That is the sort of nonsense which Opposition Members peddle as their recipe for dealing with the Budget problems. They say that there is an enormous amount of money which they can obtain by taxing those on higher incomes.
In the present circumstances, it is right that the Budget should have a balance between the interests of taxpayers. That is why we have been able to make a further move on the basic rate and why that has been so widely appreciated and so popular in the country. That move has not been popular with the Opposition. The Opposition have said that they would not oppose the move as they realise that it would be ridiculous to do so when people want lower and not higher tax.
§ Mr. Stewart
Listening to speeches from Opposition Members, one would think that people wanted ever increasing rates of taxation. That is, of course, what the people have always had when the Labour party has been in power.
§ Mr. Stewart
High rates of taxation make an inefficient economy. One of the essential ingredients for making an efficient economy which can continue to provide jobs is that the burden of taxation on industry, business and individuals should be as low and not as high as possible. I am sorry that that sentiment is not shared by Opposition Members.
§ Mr. Wrigglesworth
Will the Minister study the comments made by the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) on the Jimmy Young programme this morning in which he made it clear that he had no objection to people earning more than £20,000 a year and that he did not intend to increase income tax for those people?
§ Mr. Stewart
I listened to the comments made by the hon. Member for Stockton, South, and I have a transcript of what the right hon. Member for Sparkbrook has said. He said that the Opposition would have to call for a greater contribution from the people at the top of the wages ladder. He would then use the extra £3.5 million to help those people in most need. I have sympathy with the hon. Member for Stockton, South, as the right hon. Member for Sparkbrook changes his tune so often that it would not be at all surprising if he had said today the precise opposite of what he said yesterday. That would be precisely in tune with what he has been saying about public expenditure.
I would now like to discuss a subject which is perhaps a little less contentious than my previous points. It is 507 important during the debate that we should have some consideration of the tax reliefs for charity which have received a welcome on both sides of the House.
Opposition Members sometimes find it amusing to portray Tory Ministers, and particularly Tory Treasury Ministers and Chancellors, as grim and Scrooge-like figures. That has always been a complete misrepresentation, and after this Budget the Opposition will find it impossible to argue that case.
It is fair to say that my right hon. Friend's proposals for tax reliefs on contributions to charity have met with a more enthusiastic welcome than any other Budget measure in memory. The charities VAT reform group has described the VAT concession as being the most substantial concession that the Chancellor has ever given on the charities VAT bill. The newly formed council for industry and higher education has been pressing for such measures on corporate giving here because such measures do so much to sustain and expand higher education in the United States. In the United States private finance alone is worth twice as much as the whole of the University Grants Committee's grant for higher education in the United Kingdom.
The director of the Association for Business Sponsorship of the Arts has said that the tax relief may mean as much as £10 million extra for the arts in the next financial year. The director of the Charities Aid Foundation has described my right hon. Friend's package as "breathtakingly radical". He has said that, according to his assessment, the combination of measures should double the £1 billion of private support currently going to charity. It is right that those measures should be strongly supported on both sides of the House.
Giving to charity is deeply ingrained in the British tradition. What my right hon. Friend has done, in a characteristically creative and innovative way, is to furnish the charities with a range of opportunities for self help. It is now up to them to realise them in an effective and organised way. In some areas—
§ Mr. Stewart
—state action is second best to private initiative. I have every confidence that those opportunities will be seized with the energy and imagination which private initiative can generate.
§ Mr. Stewart
The extra funds should now be available. It will be up to the charities to make their pitch. I welcome the contributions of the hon. Member for Kingston upon Hull, East (Mr. Prescott) from a sedentary position—
§ Mr. Stewart
As a practice, I do not give way to hon. Members who behave in such an uncouth fashion and I do not propose to do so tonight.
§ Mr. Stewart
—a drop in energy prices, a drop in interest rates and a drop in the corporation tax rate. All those have come together. A fall of a dollar in—
§ Mr. Dixon
On a point of order, Mr. Speaker. I was under the impression that when a Member wound up a debate such as we have had today he would deal with the contents of that debate. We have been making points about unemployment in our constituencies which have been ignored by the Chancellor. Yet the person who is answering, that squalid little person there, has never once talked about—
§ Mr. Speaker
Order. The hon. Member for Jarrow (Mr. Dixon) knows perfectly well that he must not say things like that.
§ Mr. Stewart
It is not surprising that people in Britain do not regard the Labour party as remotely suited ever to take power—
§ Mr. Stewart
The behaviour of the hon. Gentleman has been simply disgraceful today. He held the Dispatch Box for nearly an hour. He tried over a long period to ruin the speech of my hon. Friend the Member for Stratford on Avon (Mr. Howarth) and he is now trying to prevent the Government from putting forward their comments on the Budget at the end of the debate.
§ Mr. Stewart
I was talking about industry. The hon. Member for Jarrow (Mr. Dixon) wanted to try to prevent me having the time to address many of the issues which have been raised in the debate.
The best way that we can encourage further jobs in Britain is to have a strong and successful industry and commercial sector. Just because the 35 per cent. rate of corporation tax was announced and introduced two years ago, we should not forget that this, 1986–87, is the first year when we will have the lowest corporation tax rate for many years in Britain and one of the lowest among the industrial countries.
That is one reason why we can look forward to a continuing period of growth in the British economy in the coming year, building on the five years of continued growth that we have now had, despite the sharp shock which has been administered to the economy by the oil price.
§ Mr. Stewart
That is why we can continue with our measures in the economy not only to help the company sector and investment, but also with the package of employment measures—
§ Mr. Stewart
—which my right hon. and learned Friend the Paymaster General described so effectively earlier.
The Paymaster General pointed out that we had done a great deal to help those who are not fortunate enough to be in work—
§ Mr. Stewart
That is an important part of this Budget as it has been of recent Budgets. I remind hon. Members that in the last Budget my right hon. Friend restructured the whole of the national insurance contributions in such a way as to give the greatest help to those at the lower end of the payments scale and to encourage people to take new jobs—
§ Debate adjourned.—[Mr. Lennox-Boyd.]
§ Debate to be resumed tomorrow.