§ [Relevant documents: European Community Document No. 10155/86, Annual Economic Report 1986–87 and the unnumbered document, Annual Economic Report 1986–87 (final version as adopted by the Council).]4.15 pm
§ The Paymaster General and Minister for Employment (Mr. Kenneth Clarke)
Today it is proper to begin to consider the extent to which Tuesday's Budget was a Budget for jobs, and undoubtedly it was a Budget for jobs. The background is that this morning's unemployment figures show that our economic policies are continuing to produce jobs. This month's reduction of 44,000 in the seasonally adjusted number of unemployed was the largest fall for any month since records of this kind began to be kept. We have now had falls in unemployment for seven months in a row. Since last July unemployment has gone down by nearly 150,000, and that is not the only good result since 1983.
Unemployment in Britain is falling faster than in any other industrial country. All areas of the country have shared in the reductions this month, with Wales in the lead. The number of those out of work for more than a year—the long-term unemployed—is now coming down steadily and youth unemployment, which has been falling for about three years, is continuing to fall steadily as well.
There is no doubt that the background to our discussion is that the monthly fall, which has been running at about 20,000, will continue. I believe that the Budget that my right hon. Friend the Chancellor of the Exchequer presented on Tuesday will sustain the momentum of that welcome downward trend. The difficulty facing the three Opposition parties—they do not enjoy listening to this much-improved news—is that they do not understand how real jobs are being created in the economy. Hence they are somewhat bewildered when the figures continue to look so good.
We, on the other hand, have a strategy for jobs. It is a strategy that is working and one that the Budget has undoubtedly strengthened. The essential basis for any job 1056 strategy is a sound economy with steady growth and low inflation. Those are the conditions that create the economic climate in which firms can compete successfully and create jobs.
The growth in our economy this year has been sufficient to finance higher public spending and to reduce personal taxation and public borrowing. The combination of those three aspects emphasises our commitment to steady growth and low inflation. The lower interest rates that are beginning to come through in the wake of lower public sector borrowing will help companies to compete through lower costs, and encourage investment and jobs.
In contrast to that, we shall have to listen this afternoon to a succession of speeches from Opposition Members extolling the virtues of more public spending designed to boost favoured areas of the economy. With some small variations, it will be claimed by Labour, Liberal and Social Democratic spokesmen that various job packages can be put together in that way.
Some will claim a spurious respectability for their shabby parcels by saying that they have tried them out in computer programmes. I recently appeared on a television programme on which I had to listen to a bewildering discussion between Mrs. Shirley Williams and the hon. Member for Dagenham (Mr. Gould), comparing the respective merits of the computer programmes through which they were feeding their high public spending plans.
That is all irrelevant to the satisfactory events outside this House. I ask right hon. and hon. Members to reflect carefully, to remember their own experiences in office and to consider the experience of other countries when those countries have tried to follow such nostrums.
I shall begin by discussing the reductions in personal taxation.
§ Mr. John Prescott (Kingston upon Hull, East)
Did I hear the Paymaster General aright when he said that we must compare our experience with that of his Government? Does he agree that the number of people in employment when the Labour Government left office in 1979 was 400,000 more than it was when that Government came to office?
§ Mr. Clarke
When the Labour Government left office they left a collapsed economy going into recession, with the result that we had to shed many jobs in the first two or three years. The recovery in the economy during the past few years and the increase in the number of people in work, particularly since the spring of 1983, is better than that achieved in any other country. Of course there were more people in work in 1979, but most of them were in overmanned and uncompetitive industries and were doomed to losing their jobs in the wake of the high inflation that the Labour Government had imposed on the economy as it went into a severe world recession. It is obvious that the points I made were related to the strong and sustained recovery that the country has been making ahead of any others over the past six or seven years.
This year in the Budget the reductions in personal taxation are the key elements in the Government's strategy. The Opposition obviously attack that and claim that the choice confronting the Chancellor was tax cuts or jobs. In my opinion, two false assumptions lie behind that claim. The first is that somehow tax cuts cannot help to create enough jobs in an expanding economy such as our own, and the second is that public spending can, in itself, 1057 create more real additional jobs that last. Both those propositions are fundamentally misconceived. One of the reasons why my right hon. Friend the Chancellor chose to cut personal taxation is that tax cuts help to create jobs. They improve incentives, make it easier to keep pay increases in line with performance and they should make it easier for people to keep their wage demands in line with the performance of their companies. That helps us to reduce our unit labour costs, which, I am glad to say, are now in line with or below most of the costs of our competitors, and it should help to increase our competitiveness. That is the one real route to real jobs because more competitive firms can export more and supply more home demand.
The main effect of tax cuts is that they give people a real increase in their standard of living. It can be more accurately described as giving them back the standard of living they earned before Government taxation reduced it. As I understand it, the Opposition are not trying to make out some extraordinary case against increased living standards. The hon. Member for Kingston upon Hull, East (Mr. Prescott) is constantly urging increased take-home pay for millions of workers on average and below average earnings up and down the country. The strange position he is in is that he advocates increased living standards as long as they are achieved by pay increases but he is opposed to increased living standards if they are achieved by tax reductions.
§ Mr. Clarke
There is an obvious political reason behind that apparent anomaly. He believes that workers will be grateful to trade unions for pay increases but grateful to the Government for the tax cuts we produce. There is an important difference. Pay increases put up industrial costs. Pay increases ahead of productivity and performance can cost jobs. Tax cuts do not cost industry. At no cost to industry or employers my right hon. Friend the Chancellor has raised the living standards of 25 million taxpayers.
§ Mr. Clarke
I think that the Opposition are in favour of raising living standards but when we talk about raising living standards by tax cuts—it never happens when we are talking about pay increases—we sudeenly have an outbreak of arguments about consumers spending money on imports. Indeed, I heard the hon. Member for Birmingham, Ladywood (Ms. Short) say something about buying goods from Japan. I do not understand the logic of the argument that it is wrong to increase the amount of money that stays in the pocket of taxpayers because they might buy goods from abroad. I cannot understand why that logic is never applied to pay increases when they are advocated or supported by Opposition Members. I look forward to the day when local authority workers next apply for—
§ Mr. Leighton
Will the right hon. and learned Gentleman give way?
§ Mr. Clarke
I will not give way.
I look forward to the time when local authority workers next seek a pay rise and Opposition Members say, "No. It is wrong to increase the take-home pay of that large body of workers because they cannot be trusted with the 1058 money and might go out and buy imported goods." The answer to the question of imports, if anybody is concerned about it, is to carry on improving the competitiveness of our home producers, continue improving the quality, price and reliability of our goods and maintain our market share, as we are maintaining it in world trade. We are also increasing the volume of our exports. The idea that the answer to imports is to keep the public poorer is an extraordinary argument. Indeed, if one was to succeed in making the population poorer by reversing the tax reductions we have announced, I would still expect that poorer population to spend the same proportion of their earnings on imported or home-produced goods, according to their quality and attractiveness. It is absurd to respond to tax cuts on the grounds that they somehow give rise to a greater danger to the balance of trade or overseas imports.
If the Opposition support higher living standards from higher pay, but not from lower taxation, they clearly have no time for any increase in incentives to those who work in the British economy and who are succeeding in making it more dynamic. When we entered office in 1979 the basic rate of tax was 33 per cent., as hon. Members will recall, the higher rates of tax were 40 per cent. rising to 83 per cent. and 3.5 per cent. of taxpayers paid tax at higher rates. The tax paid by those top taxpayers amounted to 20 per cent. of the total income tax paid. We reduced the higher rates in order to promote entrepreneurship, encourage risk-taking and to stop the drain abroad of our best talents, all of which was taking place in 1979.
Look at what has happened since then: higher rates have been reduced, thresholds have increased in real terms, and the basic rate has been sharply reduced. The earnings of those higher rate taxpayers have increased to such an extent that they now represent 5 per cent. of taxpayers and they contribute no less than 27 per cent. of the yield. The top 10 per cent. of taxpayers—the top-earning 10 per cent.—are now contributing 37.5 per cent. as against their 34 per cent. share in 1978–79. The lesson is simple. Reducing the tax burden does not seduce the proportion of the take from the higher earners but the more people work for themselves and their families, the more effort they are likely to put into managing and developing their businesses and, in turn, the more the general public benefits.
§ Mr. Max Madden (Bradford, West)
How, in terms of fairness, can the Paymaster General justify a situation that has arisen since 1979 where those on £125 a week have, through tax cuts, saved £2 a week whereas those on £70,000 a year have seen tax cuts of £389 a week? How, in equity, can the Paymaster General justify that?
§ Mr. Clarke
It is obvious with the graduated income tax that, in cash terms, higher earners save more than lower earners. In fact, throughout our period of office, the benefits of tax reduction have been spread across the spectrum. Indeed, by raising the level at which people start to pay tax, we have reduced the number of taxpayers by about 1.5 million. There would be almost 1.5 million more people paying tax if the thresholds had remained at the levels we inherited from the Lib-Lab Government.
I shall now return to the argument, which is full of weaknesses, about tax cuts versus jobs. One weakness is the belief that all three Opposition parties share about the role of public spending in creating jobs. One thing that the 1059 different packages put forward by the Opposition parties have in common is that they are all based on the notion that the Chancellor hands over a large sum of public spending, presumably to the Secretary of State for Employment, and then that public spending is distributed to favoured groups in a way that creates jobs. Of course, one could have an immediate and short-term impact if one increased the spending of local authorities up and down the country. If one did that one would, in the short term, create more local authority jobs. However, that is a short-lived increase in the total level of employment in the country.
§ Mr. Tony Banks
§ Mr. Clarke
The artificial creation of such jobs inevitably raises taxes, or increases interest rates. The policies of all the Opposition parties seem likely to do both. That raises the cost of other parts of the economy and it loses more productive jobs elsewhere.
Just as in my opinion the tax cuts versus jobs hypothesis is based on a total misconception of how jobs are created in a modern economy, so, in my opinion, is the argument that we have chosen tax cuts as opposed to improving services. Many of the "make-work" schemes of the Opposition plan to increase spending and jobs in essential public services. However, most of them are in services in which the Government are already expanding spending, and sometimes employment. Continuing steady growth in the economy will mean that more money will be available to spend on public services such as health and education. Indeed, we have proved that. As a result of our record growth, the Government have been able to demonstrate that only this year. That is why we announced last autumn increased spending of £4¾ billion—much of it in health and education. At that time the House was lobbied and I was more closely involved than usual in the public spending discussions.
When we publicised our public spending plans, we were accused of making a U-turn. We were accused of going on a spending spree. The difference between that increased spending and the kind that our opponents are contemplating is that we have increased spending only in line with the ability of a growing economy to afford it. When the Labour Government were in office, they failed because they did not understand that the growth of GDP has to come first and then public spending follows.
When we choose our priorities for increased public spending, our first priority must be dictated by the need to improve the level of service to the public. We must consider what is best for pupils and what is best for patients. We are not concentrating on spending money to produce overblown levels of manning, which is what the programmes of the Opposition seem to imply.
Governments who have tried to promote growth by pumping the economy full of money that they did not have found that they had to raise taxes to pay for their increased borrowing. They failed to sustain growth in the economy and before long they had to cut public spending, which they had stimulated artificially for a short time.
§ Mr. Tony Banks
We are not talking about a Government who, at this time, do not have any money to give away. It is well known, as the Chancellor made quite clear, that there were many billions of pounds to give away. Will the Minister explain what would create more jobs—£3 billion spent on tax reductions, or £3 billion 1060 spent on targeted public expenditure such as infrastructure investment? Surely that is an investment in wealth and it certainly would create many jobs.
§ Mr. Clarke
Chancellors do not give money away. They raise revenue from the economy and dispense it. We are talking about the amount that the Chancellor can afford to keep in the economy. It is the combination of higher public spending, lower personal taxation and reduced public sector borrowing that is the key to this Budget. The hon. Gentleman is right. It is astonishing that no one is claiming that we cannot afford it. Such is the growth of the economy that everyone accepts that the billions of pounds of increased public spending, reduced taxation and reduced borrowing are perfectly affordable. We now have an economy that performs in such a way as to sustain that. The only argument from Opposition parties is that the Chancellor should spend several billion pounds more than we have and establish make-work schemes through overmanning in either the nationalised industries or the public services and returning to the old type of jobs package.
The use of public spending as a main weapon to regenerate the economy or to create jobs has usually been followed by unemployment and public spending cuts. We do not have to look too far to see how that has happened. We should consider the history of the Mitterrand Government in France. When they first took office their policies were remarkably similar to those of the Opposition parties. They had to reverse them after those policies had caused disaster within the first two years. That happened to the last Labour Government. They came into office with a rapid increase in public spending, followed by visitations from the IMF and savage public spending cuts. The last Labour Government were the only Government who would ever have dared to cut spending on the National Health Service in real terms because they were obliged to bring in the IMF in the late 1970s.
In contrast, our jobs strategy is to tackle the real needs of the economy. There is a need for skilled and well-trained people and people who are involved in the success of their companies. We need to create new firms and develop existing firms. We recognise that the special problems of the unemployed will have to be helped by programmes which will not give them useless jobs and overmanned services, but remotivate them and help them back into the expanding labour market. The expansion of our employment programmes, the last announcement of which we made last January, will strengthen that jobs strategy.
Our strategy tackles the need for training in the economy. The new job training scheme will help the unemployed to raise their skill levels, which will get them back into employment, and gradually improve the skill level of many in the labour force. The taxation changes announced in the Budget will give a tax incentive both to employers and to employees who are prepared to retrain for new employment opportunities.
The tax concessions announced by my right hon. Friend the Chancellor in his Budget, and the JTS programme announced in January, are only the last in a programme of growth in the training provision in this country.
§ Mr. Prescott
What about the progress rate?
§ Mr. Clarke
I am surprised that the hon. Gentleman is not more subdued. The programmes that his party wishes 1061 to introduce imitate rather than criticise our schemes. Perhaps that is because of the slight change in guidance on the direction of employment policy.
Before the hon. Gentleman speaks, will he consider that about 1 million people in the coming year will be undergoing training under the YTS, the JTS, the enterprise training scheme and the adult training strategy, and that those I million people will be training with employers, supported by the Government? Only about a quarter of a million people were undergoing such training when the Labour Government left office in 1979. The only sensible part of the Labour party's jobs programme seems to be a straight crib of our JTS programme. That would cover about 300,000 of the places that the Labour party was looking for.
The difference between us and the Opposition is that they are not content to allow employers to take the lead. We tend to do that because we believe that it ensures training in the skills that really exist in the market place. The Opposition appear to want to tax industry heavily so as to give the Government a much stronger guiding role in the nature of training that is given.
The hon. Member for Kingston upon Hull, East will have the opportunity when he speaks to explain the levy that he announced of at least 1 per cent. of turnover on all firms. A document published this morning still refers to that levy, but it has been toned down so as not to give any specific figures. However, the document seems still to imply a levy on all firms, with no exemptions. The street corner shop apparently is to contribute to such a levy, the purpose being that instead of building on the training programmes of employers, as we are with work experience with employers, a Labour Government will step in with a huge amount of taxation on all companies so as to run the training programmes themselves.
§ Mr. Prescott
The Paymaster General is right; perhaps I shall discuss the details of training in my speech. But first I must refer to the 1 per cent. levy on turnover. We have never said that the proposed levy would be 1 per cent. on turnover. I have said that the figures that we were aiming for and the resources to achieve comparability with most of our competitors lay within the range of 1 per cent. of turnover, and a combination of levies, contributions and grants would be the way in which we would finance a much more radically expanded programme. That is precisely what is outlined in today's document.
§ Mr. Clarke
I suspect that there was some scouring of past texts to come up with that formula. I assure the hon. Gentleman that I shall scour the text myself. I may be mistaken, but I recollect that the hon. Gentleman said in this Chamber that there would be at least a 1 per cent. levy on the turnover of all companies. I have a feeling that he has lost that particular struggle at this stage in producing his party's document, but the hon. Gentleman is still talking about a levy on all companies with limited exemptions. That means that all small companies will face a new 1 per cent. tax. That does not help jobs; that cuts jobs. The hon. Gentleman will have to explain the contrary if he believes it.
§ Mr. Richard Ottaway (Nottingham, North)
My right hon. and learned Friend made be interested to know that the Opposition spokesman for employment came to my constituency and made that announcement about the levy.
§ Mr. Clarke
If the hon. Gentleman went to Nottingham to make that announcement, he went to a most important place to underline that policy. I think that it has been ironed out in Dagenham—but I fear that it has not been reversed, merely obscured. To be fair to the hon. Member for Kingston upon Hull, East, he has won one battle because the levy still exists, as it was included in the document this morning. Perhaps the hon. Gentleman will be a little less emphatic about how much it will cost British industry—but cost it will.
Our strategy extends not only to training, because it is also designed to get employers and employees together so that they have a common interest and involvement in the success of their companies. I welcome my right hon. Friend the Chancellor's decision to introduce tax relief on profit-related pay on a more favourable basis than that outlined in the Green Paper. That should also be welcomed by everyone on both sides of industry, not because that form of relating pay to company performance is the only way or necessarily the best way to involve employees, but because it is one very useful method. It is vital to encourage managers and employees to continue to relate pay ever more closely and flexibly to company performance. It is also vital for people to be involved more closely in their companies and profit-related pay is an extremely important way of achieving that.
Our strategy also involves the encouragement of small firms. They are not highly regarded by the Opposition because the Labour party does not have a strong political base there. Small firms have proved to be the main source of new jobs here as in every other advanced and developing country. The Budget directly helps new and small firms in a number of important ways, building on the progress made in previous years.
I do not know whether hon. Members appreciate what a huge easing of the burden on small firms the VAT proposals in the Budget will be. The ability to account for VAT on an annual basis will reduce the administrative burden and help the cash flow management of small firms. The ability to account for VAT on a cost basis matches the VAT system much more closely to the way in which most small businesses are run, and also solves the problem of VAT on bad debts which, as I am sure my hon. Friends will agree, has been the source of persistent complaints from small business men for as long as any of us can remember. Tax reform of this kind will lift the burden on many small businesses and enable people to pay more attention and give more time to the real needs and problems of running a small firm successfully.
The reduction in personal taxation and the cut in corporation tax for small companies will give small businesses more room in which to develop and a greater incentive to expand and create profits and jobs. All these measures support our direct steps to help the long-term unemployed—people who have been out of work for six or 12 months or more—to get back into the expanding labour market which our economic policy is creating. Our restart and community programmes and our other programmes all come into the picture.
Of course, when we produce good news on jobs, as we have done today in talking about the downward trend in unemployment, the Opposition attack that part of our policy which gives rise to that good news, saying they are just schemes. They ignore the background that I have just given of an expanding economy and all our direct support to new businesses and new job creation. 1063 The Opposition do not even understand the programmes that they attack. The shadow Chancellor is not in the House. He has an appalling record for attacking all the good news about jobs through our schemes, and he does not even take the trouble to find out what on earth the schemes are. In describing the restart programme, he said:I am aware that the scheme for identifying the long-term unemployed and giving them counselling … is not only … patronising to the long-term unemployed, but demonstrates a deep ignorance of the problem."—[Official Report, 19 March 1986; Vol. 94, c. 306.]I am glad to say that the restart programme is now tucked away in the Labour party's policy document. After the abuse to which it has been subjected, the Opposition now incorporate that scheme in their policies. The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) talked abouta deep ignorance of the problem.He continually demonstrates a deep ignorance of the nature of the help that our schemes give to unemployed people. Yesterday morning I listened to him on the "Today" radio programme and I was astonished at what he said. I have the transcript here. He was talking about the way in which unemployment has fallen over the past six months. He did not know how good the news would be this morning. He said:It's not a very real drop,and he turned to what he called "those extraordinary schemes".Do you know that young people in my constituency are told they only get unemployment pay if they go to job clubs. and when they turn up to job clubs they're required to play games under the supervision of nursery school teachers. Thus they're removed from the unemployment register. Thus the figure goes down. I think humiliating them that way is disgraceful. It has absolutely nothing to do with improving the economy.It also has absolutely nothing to do with the truth. That statement is totally and ridiculously wrong in every feature. Job clubs are not at all as the right hon. Gentleman describes them. They are attended by longterm unemployed people who are brought together and given help in searching for jobs. They are allowed free postage and free telephone calls and given professional support in applying for the jobs which can be found in the evening and provincial newspapers as well as in our jobcentres all over Britain.
Those unemployed people are successful. The people in job clubs are not removed from the unemployment count as the right hon. Gentleman said, but they remove themselves because the majority of them get jobs. The right hon. Gentleman was talking about his own constituency. I looked up the job club in his constituency and found that of those who go to it 72 per cent. leave the unemployment count because they go into jobs and training. More than half of them get jobs and another quarter go into training and into the community programme. The score in Sparkbrook is that 72 per cent. of people are being helped into jobs by the Sparkbrook job club.
The right hon. Member for Sparkbrook derides the club. His claims are ridiculous. I usually accuse the hon. Member for Kingston upon Hull, East of making up things on his feet as he goes along. The next time that he does that I shall accuse him of having a touch of the Hattersleys, because the right hon. Member for Sparkbrook obviously made up his claims as he sat talking 1064 into the microphone in Broadcasting house. He is doing serious damage by talking nonsense because all the people that we are helping in Sparkbrook will be deterred from going along and getting the growing number of jobs that can be found in the Birmingham Evening Mail and in our jobcentres. That will happen if the right hon. Gentleman continues to make irresponsible and ridiculous remarks.
It is not just that the Opposition do not understand our programmes. As I have tried to explain, the schemes are only one part of our job strategy for bringing the longterm unemployed into an expanding economy and into all the new jobs that are coming along as we stimulate new and small businesses. The trouble with the Labour party, the Liberal party and the Social Democratic party is that they are completely hung up in asserting that expanding and stimulating the economy in this way is no answer. They want jobs programmes involving £X on public spending and believe that that will somehow be converted into Y jobs by some other Minister.
I have already described the ridiculous process of those parties, arguing about computer models into which they feed their various programmes, to which I had to listen. Creating the right conditions for employment is not just an academic exercise on a computer programme. There is only one representative of the alliance in the House. However, he is a distinguished one.
I heard Shirley Williams somewhat troubled by allegations made rather skilfully by a Labour spokesman about the slight adjustment that would have to be made to the alliance computer model in order to get the right answer to come out. The one result the computer did produce was that unemployment would continue to come down under Conservative policies. The alliance reduction was not quite right and structural changes were made to the computer.
I am reminded of what I believe is a true story about a chap who had theories about the great pyramid in Cairo. Some people specialise in producing tremendous theories about the course of history and the end of the world by drawing up theories about the measurements of the great pyramid. One night one such person was found at the peak of the pyramid trying to chip a little bit off to try to make the great pyramid fit his theory. That seems to be the kind of practise in which alliance politicians indulge with their computer models and their extraordinary programmes.
Given the programmes produced by Labour and the alliance I find it difficult to tell their policies apart, especially because changes are continually being made to the figures and the content every time a spokeman for one or other party produces the latest version. The alliance and the Labour party have the same unrealistic target because they use the same unrealistic method. The alliance claims to be moderate because it says it will take a little longer to get there. Both Labour and the alliance admit that they would push up taxes. The alliance would certainly have to do that. Both Labour and the alliance would push up borrowing and inflation and in the long term they would push up unemployment rather than reduce it in any lasting way.
The only moderation that I can see in the policies of the alliance is that it cliams that it will spend on its package £1 billion less than the Labour party. That is based on alliance costings which I do not believe for one moment. The only other difference that I concede to the parties of the alliance is that they admit that their policies would be 1065 inflationary. They would seek to restrain that, not with a new idea but by going back to the tired old answer of a statutory incomes policy.
Spokesmen such as the right hon. Member for Glasgow, Hillhead (Mr. Jenkins), a former Chancellor of the Exchequer, have been going back to the good old days and producing a somewhat watered-down version of Labour policies. He has described with loving care the model of a statutory incomes policy, with every employer notifying central Government of every pay settlement.
The imposition of the Government norm with a new tax imposed on companies that do not comply with it takes us straight back to the days of the Wilson and Callaghan Governments. We should not be going back to those days. We need to build on the success of our policy, and the success of Tuesday's Budget. By judicious management of the economy the Government have achieved three central objectives. First, we have cut taxes at the base rate. Those cuts will create the improved business climate in which jobs are created. They will provide assistance for the low paid, just as the lifting of 1.5 million people out of the tax bracket by the Government has increased incentives. The strong downward trend in unemployment over the past seven months has given people the incentive to work, to seek new jobs and to join an enterprise culture which tax cuts will help.
Secondly, we have also cut borrowing by reducing the PSBR to £4 billion—a target which in the past 48 hours has produced a fall in interest rates which will also reduce industrial costs, increase competitiveness and create real jobs.
Thirdly, we have the £4.75 billion additional public spending, first announced in the autumn statement, essential spending on our Health Service, our education service, the poor and those most in need. As I said to the hon. Member for Newham, North-West (Mr. Banks), no one denies that the growth in the economy enables my right hon. Friend to afford all that additional spending. Only sustained growth in the economy with low inflation, increased competitiveness and increased productivity can achieve those three objectives simultaneously.
§ Mr. Cranley Onslow (Woking)
May I draw my right hon. and learned Friend's attention to the fact that the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) has just sauntered in? Will my right hon. and learned Friend repeat the telling passage in which he demolished the right hon. Gentleman in his absence?
§ Mr. Clarke
As the right hon. Member for Sparkbrook is not going to become Chancellor of the Exchequer, he may soon face a prolonged period of unemployment. I suggest that he visits the Sparkbrook job club, where he will find valuable services of which he is at present hopelessly ignorant.
§ Mr. Roy Hattersley (Birmingham, Sparkbrook)
The area has a male unemployment rate of 51 per cent., which has increased from 17 per cent. since the election of the Conservative Government. How many of those men does the right hon. and learned Gentleman think that the jobcentre will help?
§ Mr. Clarke
The right hon. Gentleman should listen more carefully. I was not talking about the jobcentre; that 1066 is the office to which he would go to look for job vacancies. If the right hon. Gentleman had been present, he would have heard the welcome news that of those who visited the Sparkbrook job club, which he was attacking the other day, 72 per cent. had ceased to be unemployed. Half of them had obtained jobs, while the remainder had been taken on to training and community programmes.
It is no good the right hon. Gentleman looking so sad and worried. He should be rejoicing. The fact that such things can happen in his constituency shows what the Government can achieve. The fact that the right hon. Gentleman is so out of touch with his local job club may explain why his constituency is often littered with posters demanding his deselection by dissident groups in his party. He should nurse his constituency more carefully, and find out what is going on there.
§ Mr. Hattersley
The right hon. and learned Gentleman is right to say that he is making me angry. My anger is on behalf of the 51 per cent. of my constituents who are unemployed. Let me ask the right hon. and learned Gentleman the question again, so that he will have a chance to give a straight answer. How many of those men will be helped by the job club?
§ Mr. Clarke
No doubt I shall be able to find a figure for Sparkbrook. I am sure that Sparkbrook is benefiting from the continuing fall in unemployment in the west midlands. Employment in that region collapsed in the wake of the collapse of the vehicle industry which followed years of subsidy, mismanagement, overmanning and bad industrial relations in the 1960s and 1970s. The industry fell prey to a number of problems in the recession which followed the departure from office of the Labour Government.
However, over the past year, unemployment in the west midlands has been dropping consistently. It is third in the list of regions in which unemployment is falling most rapidly. The right hon. Gentleman should rejoice that unemployment is falling and that positive action is being taken in Sparkbrook, rather than giving entirely fanciful descriptions on the radio of what is occurring.
As I have said, only sustained growth in the economy can achieve the objectives that my right hon. Friend set out in his Budget. Only those policies can sustain and accelerate a long-term downward trend in unemployment. So far, we have seen the creation of over 1 million new jobs since the spring of 1983. That record is the envy of our competitors, and is fast becoming a matter of great concern to all the Opposition parties. We intend to sustain that record, stimulated not least by my right hon. Friend's Budget statement.
§ Mr. John Prescott (Kingston upon Hull, East)
The Paymaster General usually makes his points much more clearly. His speech today has been very confusing, but I shall try to answer a couple of his observations.
The right hon. and learned Gentleman seemed to be knocking economic models as making no contribution to judgments and decisions about the creation of work. But, while he may ignore what such models tell him, I believe that the Chancellor would work on the Treasury model and make many judgments and assessments in the light of the information that it provides.
It is generally agreed that many more jobs can be created through public expenditure than through tax cuts, 1067 although we may differ about the sort of jobs that it creates. The evidence for that comes from the Paymaster General himself. The right hon. and learned Gentleman said that the Government had spent an extra £4 billion, creating jobs in health, education and other public services. He answered the very question that he posed: public expenditure can play that role.
If we compare the performance of our economy with that of other members of the European Community, we see that their use of public expenditure has been much more effectively deployed and that they have been able to maintain far higher employment than we have. We have considerable evidence on which to make judgments about the role of public expenditure—some of it has even been provided by the OECD— when comparing Britain's economy with those of the other developed countries.
Whatever else is claimed for this Budget, it has certainly not made reducing mass unemployment a priority. That is one fact on which all observers are plainly agreed, as we can see from today's editorials. The unemployment that the United Kingdom has been experiencing is higher than it was in the 1930s, and has lasted longer. In the 1930s, unemployment increased every year for four consecutive years. However, unemployment has increased year on year in the eight wasted years of this Government's term of office. Their policy has undoubtedly contributed to that unemployment.
When the Chancellor spoke in a party political broadcast on television the other evening, we heard a great deal about how Britain was at the top of the league. He told millions of people how proud we could be when comparing the 1980s with the 1960s and 1970s. He flagged up a number of dubious statistics showing Britain at the top of the league. More significant was what he left out. The countries used by the Chancellor as examples are those used in a booklet given to us by ITN. That shows that, while the Chancellor was right to point out those things in which we were top of the league, he significantly left out the fact we are also top of the league in unemployment.
This has a significant effect on the argument about public expenditure. The OECD, in comparing the problems of unemployment in all the developed economies, discovered that Britain had a higher level of unemployment since the period 1979–84. The record shows that the average level of unemployment in Britain under past Labour and Tory Governments has been similar to the average for other developed economies, and that level has been creeping up. We must address our attention to this problem. The significant difference is that since the period 1979–84, for some reason the level in Britain has gone 2 or 3 per cent. higher.
I asked the Library of the House of Commons whether it could estimate how much less unemployment there would have been in the United Kingdom if we had kept to the average level of unemployment commensurate with the OECD countries, as we did in the past two decades. The answer is that there would have been 1 million fewer unemployed. I draw the Paymaster General's attention to the fact that the Library analysed what had gone on in the different economies. Public expenditure has remained high in the United Kingdom, but the change in how it has been spent has been considerable. We have put more into defence and less into education. I was amazed to hear the Paymaster General say that the Government are concerned about pupils and where the money goes, 1068 because everybody tells us that they are desperately short even of books to carry out the curricula which the Government have asked them to implement. It is a cheek for the Paymaster General to tell us that he is concerned about pupils. What he means is pupils in private schools. That is another difference between us and the Government.
Expenditure on transport and health—Departments for which the Paymaster General had responsibility once—has been cut, thereby throwing people on to the dole so that we spent £20 billion keeping them wasting their lives doing nothing. It is in those sectors that the Paymaster General now claims that his £4 billion package will get people back to work, but it was cuts in those sectors that contributed to the extra unemployment suffered in the United Kingdom.
§ Mr. Kenneth Clarke
I should like the hon. Gentleman to specify where he thinks we made the cuts in expenditure. Was it in the trunk road programme, in railway investment, or in the Health Service? All three sectors have seen sustained increases in public expenditure, largely making up for the 1976 cuts made by the Labour Government.
§ Mr. Prescott
That is the kind of clever answer that we have come to expect from the Paymaster General. [Hon. MEMBERS: "Oh."] Before hon. Members laugh too much, I point out that that kind of clever reply does not address itself to the problem. What the Paymaster General says about transport largely means roads. The public service obligation in British Rail was, as the Paymaster General knows, about £900 million, which is equivalent to the average support given to railway systems in Europe. That was cut by almost £500 million. That affected the level of investment in British Rail.
§ Mr. Kenneth Clarke
§ Mr. Prescott
Just let me finish.
The Paymaster General and I have argued about transport before, when we had responsibility for that subject. British Rail secured agreement with the Government to carry out investment, and we now know how British Rail carried out that investment. It increased redundancies to pay for that investment. In other words, we paid for people to be thrown out to waste their lives on the dole.
British Rail did not carry out the investment programme that it should have, and we heard some evidence of that yesterday with the sixth announcement of cuts in British Rail Engineering Ltd. With each of those six announcements, we were told that there would be no further cuts, but the company has continued to cut manufacturing capacity, which is largely dependent on public expenditure and affects the level of unemployment.
§ Mr. Kenneth Clarke
The hon. Gentleman and I are both jobbing back a little, but it is relevant to the argument. What we have cut on British Rail is losses. That makes the railways less of a drain on the general economy. We have increased investment on the railways, for example through electrification on the east coast railway line, and in East Anglia. That investment costs jobs. I usually cite this example against Liberals going on about infrastructure spending. Electrifying railways cuts manpower needs on the railways and reduces the need for maintenance. It enables manning reductions to be made. It is desirable 1069 because one gets a more modern and efficient railway, which serves the public, but it is another demonstration of how straight public spending does not create jobs.
§ Mr. Prescott
We could continue the argument, basing it on the evidence of the passenger transport consultative committee, which talks about the declining quality of travel and investment in the British Rail system. It is an independent body, the Government's watchdog, telling the Minister the results of low investment in British Rail. The deregulation of the passenger transport industry has led not only to fewer services costing more but to a decimation of the bus industry, which further undermines manufacturing. Public expenditure not only provides jobs and services and meets needs, but is used to rebuild investment in our crucial manufacturing industry about which the Government appear so indifferent.
Public expenditure is critical in any argument about unemployment, but it is not always the Government's case that it does not create jobs. The Paymaster General justified why the Government are spending more money creating jobs. Our argument is that if resources are available, they should be targeted on trying to maximise jobs and decrease unemployment. That is our central case, which we shall be putting to the electorate.
§ Mr. Stephen Dorrell (Loughborough)
Does the hon. Gentleman dismiss wholly the possibility that extra public expenditure may be justified not merely by its job creating powers but by the fact that it will improve services in education, health and so on? He is talking solely about public expenditure as a job creation mechanism. The increases to which my right hon. and learned Friend referred are justified by the fact that they improve the services available to the consumer.
§ Mr. Prescott
I endorse what the hon. Gentleman says. He must have listened to my argument when he opposed me in my constituency. Our argument has always been that we shall use public expenditure to meet real needs by providing real services and create jobs in doing so. That has as important multiplier effect on manufacturing industry, which is crucial for us. We do not want to use public money wastefully. We think how we can target it effectively in getting jobs. That 2p off income tax does not target anything. It helps the rich, who will spend on imports, thereby aggravating the problems of manufacturing industry, which cannot get a sufficient domestic base to give it the strength to export.
We know all the well-rehearsed arguments. I do not think that anybody doubts that public expenditure can play a role in creating employment. The central question about the Budget is what one would choose to do with the money. Would one make tackling unemployment the highest priority, or is one concerned more about short-term considerations— appearing to the City to be prudent and rewarding the wealthy on the proposition that some of their spending assists the economy? The Government have made the wrong choice. Their choice seems to have more to do with keeping down inflation—for example, there is no further tax on cigarettes and drink.
However, even on inflation it is remarkable how the Chancellor did not flag Britain's record. As he pointed out, the percentage has come down, but that is true of 1070 every other country, and in fact it has not decreased as fast here as it has in other countries. The Chancellor's argument about inflation is a mistruth which misleads the electorate about the true position. That is one of the reasons why we reject the central argument in the Chancellor's television appearance.
One of the main charges against the Government's priorities is that they will fuel a credit boom and create more of the problems about which we are concerned. At this time of year the Government talk about a Budget for jobs and growth. In the past they have always associated jobs with their Budget programme, and unemployment has gone up and up, in spite of nearly 750,000 places on employment schemes brought in in an attempt to fiddle the figures. That is apart from the 18 or 19 other fiddles. A significant feature of this year's Budget is that there is no pretence that it has anything to do with jobs. For the first time, the Chancellor has not made a major issue of jobs or said that the Budget will help industry. Although past Budgets have been associated with jobs—the electorate has heard that year after year— there has not been a reduction in unemployment. The opposite has happened. Despite all the fiddles, unemployment has continued to increase. In the past year there has been an increase in teaand-sympathy skivvy training jobs on community programmes, the YTS and the new job training scheme. That is because the Government are more concerned with massaging the figures than with solving the real problems associated with training our people.
Great claims have been made about the present unemployment figures. Let me make it clear—as I did with Lord Young today—that we would welcome any reduction in unemployment. We believe that much of the claimed improvement is on the basis of the Government's massaging of the statistics by means of various schemes. Lord Young said on the radio that the January job figures did not include one place on a scheme. I was surprised, because that implies that many scheme places had affected the employment figures in previous months. I have repeatedly tried to make that point and Lord Young has repeatedly denied it. Yet he said this morning that the January figures were free from any massaging. I find that hard to believe.
While I was writing this speech, a man from Burton-onTrent telephoned me. He had been self-employed for a long time, and unemployed for 12 months. This morning he received a letter announcing that he was now to be removed from the unemployment register. He wanted to remain on the register, but was told that he could not. He was told that his insurance benefits would not be affected. Presumably, because he has now reached the age of 60, the authorities believed that they would not be able to find a job for him. The letter made no reference to job clubs or any other scheme that might improve his prospects of employment. People are being removed from the register against their wishes, day in, day out.
A further fiddle is now in progress. Civil servants have been instructed that when they interview someone leaving a restart or other scheme, if they believe that he may get a job—even if it is in six months' time—they are to mark on the records that he has a job. That is to lift the figure of people who have obtained jobs from the schemes. Fiddling of that kind goes on all the time.
The electorate understands that the Government fiddle the unemployment figures, as is clear to see. I shall turn my attention to the fiddle behind the Government's claim 1071 that 1 million jobs have been created since that magical year, 1983. We constantly hear that claim from the Government. I do not know which Government were in power between 1979 and 1983; everything seems to have happened since 1983. However, I will take the Government's starting point of 1983 and look at the reality of the figures. If the employment figures today represent a reduction in real terms of 40,000, that is welcome. However, the reality is that 1.8 million more people are unemployed now than were unemployed in 1979. Despite eight years of this Government and their "Labour isn't working" campaign, nearly 2 million more people are unemployed than in 1979—even on the fiddled figures.
Let us analyse the claim that 1 million jobs are being created. The Paymaster General has sometimes rejected the Library as a proper source of information, but, nevertheless, I invite him to listen to the figures that it has provided. From March 1983 to September 1986, 593,000 people became employees. With 445,000 self-employed people, that gives a total of over 1 million. However, one must make a number of adjustments in order to understand the real position. To a certain extent, the figures are based on double counting. It is pretty much accepted that many part-time jobs are second jobs, and the Department's evidence shows that to be the case.
If one subtracts those second jobs from the 593,000, the figure comes down to 331,000— according to my analysis, 262,000 of the jobs are second jobs. I shall give the Minister the figures if he wants them. We should disregard people with second jobs. That is the important point. I hope we are not creating work so as to provide people with second jobs. We are concerned with taking people off the register and giving them one job, not two. Let me use an acceptable statistical practice. Of the total of 593,000 jobs, 417,000 are part-time. If we convert them into their full-time equivalents and then subtract that number from the full figure, the total of jobs is 385,000. Whichever figure one opts for, one reaches a total of about 350,000 jobs.
Let us consider the second figure of 445,000 self-employed. As the Minister knows, his Department has adjusted those statistics, too. Apparently, in the new labour force survey, the number of self-employed people is altered by 100,000.
§ Ms. Clare Short (Birmingham, Ladywood)
§ Mr. Prescott
That is right. They are being changed at a stroke. Let us consider the number of self-employed people registered as paying national insurance or tax. I agree that some people may avoid paying tax or national insurance so that figure may not be the same as the figure for self-employed people as a whole. However, the figure we are given of self-employed people is 30 per cent. greater than the number actually recorded as paying national insurance. If, however, we adjust the figure of 445,000 that we have been given for self-employed people to take account only of those recorded as paying tax or national insurance, that gives us a figure in the region of 300,000.
The 1 million increase in jobs claimed by the Government is, in fact, nearer to 600,000. That is another fiddle by the Government as they massage the figures for the jobs that they say that they have created since 1983.
I know that there may be some confusion among the electorate about the statistical arguments, but there is no doubt about the direction—for unemployment figures it 1072 is always downwards, whereas for the number of jobs it is always upwards. That is the effect of the Government's policies. They are policies for adjusting and playing with the figures rather than for creating work. That is our argument against the Government.
§ Mr. Ian Gow (Eastbourne)
Does the hon. Gentleman agree with the Shadow Chancellor's statement that. if the Labour party came to power, it would make no change in the way in which unemployment statistics are collated?
§ Mr. Prescott
I am grateful to the hon. Gentleman for giving me a chance to make that absolutely clear. We have made clear that our job contribution will be on the registered figures. We have no desire to change them and, in any case, if we were to change them at all the first accusation that would be made when the present Government were in opposition would be that we were beginning to change and fiddle the figures. So we shall be measured by the same criteria as the Government, who say that we cannot reduce unemployment. We cannot continue to have arguments about the dishonesty of the unemployment figures. We shall go back to a system that is comparable to that of other European countries. We shall introduce a consultative document so that, over a period of time and after proper public debate, we may begin to put some honesty into the unemployment figures.
The basis of calculation of the unemployment figures will not be changed within the two-year period that we have set ourselves to measure. I am grateful to the hon. Member for Eastbourne (Mr. Gow) for raising that point. I shall tell him why we shall be able to put honesty in those figures. We shall go back to putting up the 2,000 more houses a week that we were building before he as Housing Minister embarked on cutting the number and putting the work force on the dole. It is in that particular area of housing that the greatest need exists. It is by helping in that area that we can take off the register people who are languishing there. With the capital we can put them to work and so begin to meet the need for houses. It could not have been a more appropriate hon. Member to have raised that point.
This Budget, whatever is claimed for it in the way of its financial prudence, has nothing to do with jobs. However, one thing is clear: there will be no more doubt about the availability of money. Money is washing about. Money will come from the sale of the British Petroleum shares. There will be extra taxes from corporations, further privatisation, the credit boom. No one has any doubts about £6 billion being available if the Government want to use it. Our argument is concerned not with where the money comes from or with the borrowing requirement, but with how the money is used and what the priorities are. That is the clear issue and it is what the Chancellor has now proposed. So let us be absolutely clear that the money is available.
Our priority is to get people back to work, and to put into the training schemes the quality necessary to make them proper training schemes. In both those areas, we are spelling out our intentions in a way that no other party has done. One plan was launched today, the document on training. It puts to the electorate our arguments on how we can begin to get our people back to work by creating not only the jobs but the training required.
The Paymaster General has constantly asked us where our job programmes are and what the quality of our 1073 training will be. He has asked whether it will be any different from what his Government are doing. Our plans are now being spelt out and the Paymaster General can judge for himself. What is rather curious, after all the cries that I have heard from the right hon. and learned Gentleman outside the House about our lack of a detailed jobs package, is that he has done little about making a direct attack on the content of our proposals. I would have expected him to do that.
Our proposals consider the kind of jobs that we shall create, 1 million jobs in a two-year period. We identify the jobs and the real needs. We shall provide real services. We believe that a major contribution can be made in those areas. I can give only a summary now, but the documents are available for hon. Members if they want to look at them, and there has been quite a bit of publicity about them.
I do not think that the Paymaster General would deny that it is possible to get jobs from an improved housing programme. If the Government choose not to use the money on public housing, that is their decision. We shall change their priorities and revamp the housing programme. We know that there is a good deal more room for investment in the railways and other parts of the infrastructure. Those needs have been catalogued so often that they do not have to be argued today. The question is whether people have the resources and are prepared to use them to meet the needs and make the jobs. In that area alone, in stimulating capital investment, we have made clear that 250,000 jobs would be created in both public and private sectors. The Paymaster General tells us about the quality of services. He thinks that the only difference between us is that while we would put money into education we are not concerned about the pupils, according to him. Of course we are concerned about the pupils, just as we are concerned about the hospital service and about a number of public areas where we can invest money and create jobs and reverse the Government's policy.
I say the Government's policy because one of the prime purposes of the cash controls has been to throw people out of work. The Treasury's own rules discriminate against public sector industries which do not carry out labour-intensive investments even though they are profitable. The chairman of any nationalised industry would say the same. That is because the Treasury has ruled that each year there must be a reduction in the real cost of labour. So these bodies concentrate on capital investment rather than on labour investment even though both are profitable. It seems right to us to change those rules in order that we may carry out the kind of capital investment programme which puts a greater accent on jobs. We can discount the argument of the Paymaster General about two postmen on one job. I notice that the Post Office has increased the number of jobs by 5,000, and it has not led to a charge against the Post Office that it is inflating the labour force of a nationalised industry. The Post Office is doing a good job, meeting a need, providing a service. That is the very argument that we would use for both the public and the private sectors. The quality of the services is quite critical.
We make proposals about economic enterprise jobs and investment in manufacturing. We identify in a costed way the number of jobs available—250,000. Our programme has now been subjected to a number of computer models. 1074 I am sure it has even been tried on the Treasury model. If the Treasury model were to show that it did not work, I am sure that the Paymaster General would have been here, showing us precisely how it did not work, asking for it to be rejected and subjecting it to ridicule. But we have heard none of that. We have had the exposure of figures apparently trumped up by the Chief Secretary, who is constantly finding all sorts of proposals on which to put figures. We have proposals to create a million jobs, and these proposals are open to examination.
§ Mr. John Maples (Lewisham, West)
§ Mr. Prescott
No, I am sorry, I cannot give way. I have not enough time.
One of our proposals deals with skill training. We envisage not piecemeal schemes but the development of training in a coherent national training programme, providing 300,000 places. Today we have spelt out the kinds of training programmes that we believe to be necessary. There could not be a starker difference between the attitude of the Government and that of the Opposition. The attitude of the Government in this area was determined in 1982 by the right hon. Member for Chingford (Mr. Tebbit) who, when Secretary of State for Employment, told us that we could get more training done if we left it to voluntary schemes. He dismantled the statutory boards. He got rid of 16 of them and did away with the bureaucracy. He said that if we gave the employers more money they would produce more training and skilled places. We all know that to have been a fraud, to have been wrong. We all know now from the Chancellor's own report and from the report by the National Economic Development Council that we are desperately short of skills in every area. Every employers' organisation tells us that daily. They say that we cannot put even the unskilled to work in the building industry because we are desperately short of the most traditional skills. In many ways, the youth training scheme, particularly in construction industry training, has undermined the full-time skills because there has been a concentration on producing half-trained people rather than the fully trained people who need more than two years' training.
Perhaps the classic example is that only last week in the House of Commons the engineering industry training board actually asked the House to double the levy on its industry or remove the exemptions in order to rescue it from a crisis which it currently faces. While its levy should give it an income of £166 million, it receives only £9 million because 95 per cent. of the companies have been exempted from paying. Our skill training in this country is undermined by all the free riders who are not prepared to provide the money for training. When I hear the Paymaster General being asked to put a levy on small companies, I point out that the cut-off rate under the engineering training board is 40 employees. So 95 per cent. of companies are exempted from paying any kind of levy or doing that kind of training. We feel that that is unacceptable. All engineering firms have a responsibility to pay towards the cost of training.
Let me make it clear that we intend to build on the excellence already available. We intend to fill the empty training places that we have at present. There are hundreds of them in the engineering industry and big opportunities in British Rail who have cut back on skilled jobs, as in 1075 British Rail Engineering Ltd. There are many places available. Some of the nine Manpower Services Commission centres are available because they are still empty. We will open them up on day one; we will take the trainers off the dole and we will fund programmes of training. Even if we double our target programme, we shall not have started to compare with what our European competitors are doing. We hope in 10 years to begin to develop a training programme that will reskill our people and improve on the figures shown in the Paymaster General's survey. Only 10 per cent. of our work force is given training compared to 70 per cent. of the work forces of most of our competitors.
Apart from workers, we have the worst trained labour management of many countries. Managers are denied the opportunity of proper training because companies will not give priority to it. Our programmes are designed to bring more training to the place of work. We shall require companies to publish audits of what has been done. It is deplorable that we do not know how many skills we produced in 1985. That is one of the first problems we see when we begin to study the problem. So there will be a requirement to show what the skills are. There will be a national training fund to which all companies will be expected to contribute. It will be financed by a combination of grants and levies.
Before the Paymaster General jumps in, may I draw to his attention a press release which I got today from the construction industry training board? Apparently under its levy system— one imposed by the Government—construction firms paid £47 million in levy but they got back from the Government £67 million. The taxpayer is carrying the major burden of whatever skill training is taking place, and industry does not pay anywhere near its fair share. In other developed economies industry pays three to five times more than is paid in Britain. That is wholly unacceptable. [Interruption.]
I will answer the Paymaster General in his own terms. He knows that the Manpower Services Commission is examining precisely what is spent on training, and how the funding of training might be organised more effectively. That report should have been out before the election. It is a pity that it will not be because the Government would have had to face up to their responsibility to train people. I believe the report is to come out in the autumn. We shall take account of that study when it is published.
We are not apologetic about our view that if we are to change radically the skill content of the labour force, which is the least-trained labour force of the developed economies, we will all have to make a contribution. The Chancellor and industry will have to contribute. Industry will have to pay more. The exemption rule has been a means by which people have avoided their responsibility. Our announcement today about training programmes provides the alternative.
This Budget is in no way a solution to our problems. It is a Budget for the better off at the expense of the less well off. It is a Budget for those in employment, not for the unemployed. It is a Budget for wealth, not wealth creation. It is a Budget for short-term electoral gain, not a long-term solution to our problems. These will be the issues at the next election. We will gladly join battle on them, defeat the Government and return to begin to make the changes that are necessary.
§ Sir Barney Hayhoe (Brentford and Isleworth)
As I listened to the hon. Member for Kingston upon Hull, East (Mr. Prescott) I thought that perhaps there might have been some justification for his speech if he had made it about a year ago when regrettably unemployment was still rising. But on a day when we have had the welcome and encouraging news that the trend of unemployment has been firmly downwards for seven months and that unemployment is 150,000 lower than in the middle of last year, it seemed inappropriate for the hon. Gentleman to make most of that speech. What is clear is that the downward trend of unemployment, which is good news for the country, is bad news for the Opposition.
The Opposition reaction to these encouraging figures seemed sour, carping and nit-picking. There was nothing much new in what the hon. Gentleman said about the alternative policies that he will place before the electorate. I venture the view that those policies will he judged by the electorate as irrelevant to the real problems facing the country when the election comes, whether it be later this year or next, just as the policies put forward in 1983 by the leaders of the Labour party were judged irrelevant.
As a Treasury Minister I was involved in the construction of four Budgets. Inevitably, as would be confirmed by anyone with that experience, whether in my party or in the Labour party, Treasury Ministers are not agreed on every single detail in a Budget. But once the Budget has been agreed, collective responsibility applies, and one supports the judgments that have been made and carries them through in the detailed consideration of the Finance Bill both on the Floor of the House and in Committee. Now, of course, I am free to express the personal preferences which in the past one had to do behind closed doors with the limited numbers within the Treasury who were privy to the Budget discussions. Now a certain welcome freedom has come upon me, but I must be careful about how I use it.
As I listened to the Chancellor, the fundamental point that he was putting to the country and to the House seemed to be the strength of the British economy. If I take only one aspect, the staggering figure of £ 110 billion that is in the Red Book and was referred to by the Chancellor in his speech as the totality of the country's overseas assets is 28 per cent. of our GDP. Considered in that way, it is four times the percentage of GDP represented by overseas assets when we came to office. That shows the great improvement during the last eight years.
The oil revenues have not been frittered away, as the Opposition so often claim. Those revenues have contributed to the increased investment overseas. The income from those investments, already running at about £5,000 million a year, will steadily increase and will continue to flow long after the oil is finished and long after all of us, and perhaps our sons and grandsons, have gone. Those investments overseas, which have resulted from balance of payments surpluses, from North sea oil and from the removal of exchange control, will prove to be of great value for future generations.
Yet the Leader of the Opposition, in his rather curious and extended immediate reaction to the Budget, said that those investments represented a loss of about £70 billion net over the past eight years. So investment overseas, which is bringing a steady return, is described by the Leader of the Opposition as a loss to the country. Such 1077 curious economic thinking perhaps explains the over-emphasis of the Opposition on the problem of our balance of payments. No doubt Opposition Members look back to the traumatic time of the visitation from the IMF and see any flutter in the balance of payments as dangerous. However, the strength that we have now built up in the economy gives us the possibility of being able to deal with balance of payments difficulties in a way which was certainly not open to the Labour Government.
Yesterday, my right hon. Friend the Chief Secretary to the Treasury referred to the happy trio of higher public spending, less borrowing and lower taxes. My right hon. and learned Friend the Paymaster General spoke in similar terms today. Hindsight gives a somewhat spurious sense of harmony. A substantial chunk of the higher public spending announced in the autumn statement was for local government. That showed that the Government recognised the realities of local government expenditure in a way that had not happened previously. The public expenditure White Paper shows that for 1986–87 the estimated outturn is now about £3 billion more than it was in the plans that were published over a year ago.
I am happy with this increased realism about local authority expenditure, and I welcome the extra expenditure on health and education that was announced in the autumn statement. However, I suspect that those additions were the absolute minimum that were judged to be required by the star chamber, the Cabinet or whoever reached the final decisions, to avoid very real difficulties, and to give some scope for developing services.
Those public expenditure decisions were taken last autumn when, as the Chancellor made clear, his judgment was that there was little room for tax cuts, and, as I assume must have been true, the forecasts that were available to the Treasury were not predicting the substantial undershooting of the PSBR of which we are now aware. If the favourable tax take and borrowing figures had been known then, I wonder whether any extra spending might have seemed reasonable in that more relaxed financial atmosphere. As I believe that some extra spending, although not a great deal, might have been proper and reasonable in those circumstances, I was somewhat disappointed that absolutely nothing new was announced in the Budget.
Hon. Members from all parties will have their own suggestions about what might have been done. I know that pensioners and those who are largely, but not wholly, dependent on the state pension see people in employment increasing their standards of living much faster than they. There is certainly an argument that there should be something extra—out of the national cake, to use an old analogy—devoted to increasing those people's standards of living. It may still be open to the Government to announce that, instead of the Christmas bonus being £10, this year it could perhaps be £25. I am sure that, within the arithmetic of the Budget, such additional expenditure would not cause repercussions in the markets or undue difficulties across the exchanges.
There was a letter in The Times today about research council expenditure. Although small sums of money are involved, it seems that the extra salary increases that have been agreed, presumably by the Department of Education and Science and not by the research councils individually, will have to be met by the research councils out of their 1078 total research budgets. Therefore, they have to cut down on research to pay for those salary increases. As relatively small sums are involved, I suggest and hope that the Treasury will be prepared to look sympathetically upon the arguments that, presumably, will be put to it by my right hon. Friend the Secretary of State for Education and Science who, I have little doubt, will seek Treasury approval to make some adjustment so that cuts in research projects will not be necessary.
Having said something about pay, I now refer to the welcome increased spending on the National Health Service. In real terms, it has increased in the current year as compared with the previous year and is planned to increase again by 2.8 per cent., in real terms, in the coming year. That is welcome, but there could be problems about pay. I want to say absolutely nothing today that could have any effect on the pay negotiations that are now taking place for the Civil Service and those that are undoubtedly beginning for other parts of the public services.
However, the real benefits of those increases to the NHS could, at least in part, be dissipated if the review body awards and the pay settlements negotiated in the coming months are higher than those budgeted for in the amounts which have gone to the regions and the district health authorities. Last year, some account was taken of the awards made by the review body and adjustments were made which made it pretty well certain that, across the country, there would be no cuts in services as a result of the Government's decisions about the review body's recommendations. Again, I believe the arithmetic of this Budget should allow a similar approach to be followed later this year.
Having suggested some extra spending, it behoves me to speak instantly about extra revenue. I was disappointed that the tax on cigarettes was not indexed or increased by a little more than indexation. There are powerful arguments for increasing the tax on cigarettes not by a swingeing amount, but at least by an indexed increase or a little more. That would have provided valuable additional resources which could have been deployed in some of the ways that I have suggested.
I know that this territory belongs within the Treasury, to my hon. Friend the Minister of State, who will reply tonight. I do not expect him to reveal the advice that he gave, but I hope that he will register my disappointment, as someone who has shared and held his responsibilities for indirect taxation, that that opportunity was missed. Of course I understand the RPI effect which is pretty small in relation to cigarettes, and also the headline effect of increasing that tax. I am not quite sure whether it was the RPI or the headline effect which dominated the Chancellor's thinking. However, I should have preferred that tax to have been increased.
I should like, briefly, to congratulate my hon. Friend the Minister of State on the changes in the VAT regime. He has succeeded in doing what I failed to do when I held that job. Although we managed to make some helpful provisions for those traders who were being charged tax on money that they had not received—we made some changes in that direction— I welcome the much more effective action that my hon. Friend is now proposing. I hope we shall see that fully implemented in the Finance Bill later this year.
There is much else that is good in the Budget and in the Budget speech. Perhaps I should refer, at least in passing, to the burial of M3. I do so as one who never worshipped 1079 at that particular shrine and always regarded that idol, if not as false, then at least as sometimes giving false signs which, if followed slavishly, would lead to unnecessary difficulties in the economy. It was good to see M3 buried. I suppose that the funeral oration given by the Governor of the Bank of England in Loughborough, to which the Chancellor drew our attention, was a proper way for it to depart from the dominance that it used to hold in some thinking.
Tax cuts are generally popular and the welcome cut in the standard rate of income tax is no exception. My one regret is that ways were not found within the context of cutting direct taxation to improve the incentive differentially for the low-paid. More should be done about the poverty trap, the employment trap and the perceived surcharge on the low paid as they move out of benefits into taxation. That would encourage that element within society. When the Inland Revenue is fully computerised and there is closer interaction between what it does and national insurance contributions, other possibilities may appear through which differential arrangements along those lines can be achieved.
I welcome the downward pressure on interest rates that the Budget has produced. I support the cautious and prudent action of the Chancellor towards both interest rates and his overall Budget judgement. The central theme of the Government's case in this debate, and in May or June or whenever the election comes, is the growing strength of the British economy. Today's good news about lower unemployment augurs well for the future and I applaud the Government and the British people for all that they hve contributed to that success.
§ Mr. Richard Wainwright (Colne Valley)
It is good to hear the right hon. Member for Brentford and Isleworth (Sir B. Hayhoe) making such excellent use of his new-found freedom. I doubt whether many hon. Members have heard the burial of the dead commemorated with such a sensitive, gentle touch as his fond farewell to sterling M3. He also followed my right hon. Friend the Member for Glasgow, Hillhead (Mr. Jenkins) who yesterday made almost identical comments on the dangerous meanness of the research budgets. I hope that constant reiteration of that point, bearing in mind the modest sums involved, will penetrate the skulls of those on the Treasury Bench.
I must differ from the right hon. Gentleman on one point. The ramshackle system of Government accounting enabled him to pick out one capital item—the welcome replenishment of our overseas assets—for commendation. If we had a national balance sheet in an appropriate form, as we should have, it would be revealed that, while overseas assets have been piling up, public assets at home have been losing their value. There is a signpost to that—nothing like as much information as there should be—on page 27 of the Red Book. An important table on gross fixed domestic capital formation—in other words, the Government's stewardship of our public assets—shows that the figure for domestic capital formation by business during 1986 was the negative figure of minus £3 billion. That is an astonishing report for a country which must shortly face a future without any more family silver to sell and with much depleted revenues from North sea oil. The Government's record on their stewardship of capital assets on that count is negative.
1080 A Chancellor with a proper sense of reality would have felt obliged this year to budget not for one nation, but for two. The two nations which are widely agreed to exist are not to be distinguished geographically, because there are two nations to be found within each region. They are the two nations of the relatively prosperous—good luck to them— and the seriously deprived. That was well encompassed by one radio listener north of the Trent who listened to the Budget speech and was interviewed about what he thought of it. He simply said with northern brevity, "That is not a country I recognise. I simply do not know the Britain that the Chancellor is talking about." Indeed that must be so. I shall take only two items from many which illustrate the difference between the two nations and the gap that is still widening.
As hon. Members will know, the constrast in unemployment figures is enormous. On a county basis, to use one measure, Berkshire has about 6.6 per cent. of its work force unemployed and filling and Hertfordshire has 6.8 per cent. and falling. There are several areas like them where it would be dangerous for the Government to apply strongly expansionary measures because soon skill shortages would become acute, wages would overheat and inflation would get under way. At the other end of the scale— this illustrates the fact that the divide is not geographical— the county of Cleveland has 20.8 per cent. of its work force unemployed and Cornwall has 19.7 per cent. In other words, three times as many of the work force are unemployed in some parts as in others.
We in the alliance believe that that must be recognised. That is why under our proposals, which the Paymaster General could not be bothered to distinguish from the proposals of the Labour segment of the Opposition, employers' national insurance contributions would be reduced by 25 per cent. in travel-to-work areas of above average unemployment. That would be a targeted measure. Clearly, the tax on jobs should not be applied with the same vigour in areas of high unemployment as in areas approaching something near to full employment.
In the same way we have proposed a recruitment incentive in the black spots to employers who are willing to increase the total of their labour force by recruiting specifically from the ranks of the long-term unemployed. The Paymaster General was eloquent today about the various splendid schemes over which he presides. I am not here to denigrate them, although I deprecate the exaggeration of their benefits. I speak for many people when I say that it is disappointing that, of the long-term unemployed, who are surely the worst victims of the Government's deliberate policies, only about one in five can find a place on any of the Government's schemes. I am wholly in favour of their being invited to join properly run job clubs and so on, but only the most resilient in the best of health with a positive attitude and a good deal of luck can eventually return to employment without some assistance with repairing their rusty skills or learning new ones, or generally with readapting themselves to the habits and needs of regular work.
I regard this Government as neglectful of the interests of the great majority of the long-term unemployed for whom we believe special measures should be targeted. The Paymaster General was in his customary brazen form in saying how virtuous was the Government's conversion to higher public expenditure and abandonment of its boasted medium-term strategy in favour of more public spending because of the approach of some national event, which it 1081 is apparently sacrilege to mention. The Paymaster General was brazen in suggesting that this is the work of reformed characters because it is all going to be properly paid for.
That comes from a representative of a Government who are still—and at an accelerating pace—selling off the family silver, as we learnt last night in the Budget debate. We had been told of a figure of £5 billion asset sales in the Red Book and we were given last night an additional figure for British Petroleum which makes it even more substantial. Whatever the figure—I hope we shall be given some total when the Minister winds up tonight—there is not much more family silver left to sell off. That circumstance makes it quite attractive to be retiring from the House at the end of this Parliament. The problems facing whichever party or combination of parties comes to government will be all the more horrendous because of the profligate depletion of the national capital.
The second source of bumper revenue— I am surprised that the Paymaster General could mention this without a blush—arises from the enormously increased yield on corporation tax, being far more than the Treasury estimate, mainly because business unfortunately has not been investing, and therefore the capital allowances against corporation tax have been phenomenally modest, and disgracefully so. I do not see why the Government should take credit from a yield of corporation tax which arose from failure to invest.
Finally, the bonanza of huge VAT revenues from the credit boom—about which the Treasury and Ministers are strangely silent—must cause them a great deal of worry. That said, we welcome the partial conversion of the Government to higher public expenditure, to targeting the exchange rate, which we have been urging for the past seven years, and for the demise of the ridiculous sterling M3. That is to their credit, but it is regrettable that it is so late in the day.
Criticism has been made of the alliance plans by no less distinguished a Liberal than Samuel Brittan in today's Financial Times. He seems to think that it is very illiberal of the alliance to be complaining that public expenditure is only to be about 43 per cent. of GDP. This criticism, like that of the hon. Member for Brentford and Isleworth, ignores the difference between current expenditure and capital. The extra public expenditure which the alliance is pleading for—and would wish to have the opportunity to implement—is on the capital side: in other words refurbishing, rehabilitating and modernising our public assets, buildings and plant which have been so neglected in recent years by false economy.
Whether liberal-minded people like it or not, the state does own all these assets. To say that we should not spend money on keeping our assets in proper repair is rather like the owner of a house, which he does not enjoy very much and which he would prefer to be very different, saying "I hate this house, so I shall not repair the roof or rebuild the windows. I will let the place go to rack and ruin because I do not very much like it."
Whether we like it or not, the state has these assets and therefore has a duty to spend more on capital account to keep them in repair. Very soon the Government, of whatever complexion, have to face the fact that some of the great temporary bonanza of the last decade is rapidly coming to an end and we shall have to earn our own living without so much assistance from providence. Our 1082 objection to this Budget and to the income tax basic rate cuts, against which we shall vote on Monday, is that the Budget does nothing to prepare this country for having to earn its living in a much harsher climate.
§ 6.5 pm
§ Mr. George Gardiner (Reigate)
I listened with some interest to the remarks of the hon. Member for Colne Valley (Mr. Wainwright). He is a senior and respected Member of this House but, if he will forgive me, I will not follow his remarks in any detail since they suggested that he—and certainly his party—learned very little from our collective experience of the past 15 years and even less from the period 10 years ago next week when we had all the benefits of a hung Parliament and he and his colleagues were sustaining a Socialist Government in office.
§ Mr. Wainwright
The golden age.
§ Mr. Gardiner
The golden age—we have to remember that.
I join my hon. Friends in congratulating the Chancellor on his Budget. When we look at the British economy in 1987, with growth higher than in any other major European country, with low inflation, increasing output, growing profits, expanding investment, rising living standards—and now unemployment turning downwards—we can afford to smile at all the predictions of doom and disaster that have come so regularly from the shadow Chancellor, the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley).
Yesterday he was at it again, but finding it even more difficult to make his gloomy forecasts stick. He is like the small boy who has cried wolf a few times too often. But even that was not so bizarre as the advice offered to the Chancellor on the very eve of his Budget by four men who served as economic advisers to previous post-war Governments—architects from the years of decline and failure presuming to lecture those who are achieving expansion and success.
The Chancellor and his predecessor have together managed to create what might be called a virtuous circle because the economy is now on such a sound footing, Exchequer revenues are buoyant, thus enabling the Chancellor to increase public spending in priority areas like education and health, as he did last autumn, and cut income tax, and cut Government borrowing and so ease interest rates downwards— all these things in turn strengthening our economy still further.
I specially commend the Chancellor for cutting the standard rate of income tax to 27p in the pound, so increasing take-home pay for the man on average earnings by £3 a week. The shadow Chancellor has committed himself to clawing this back if he ever gets a chance. [Interruption.] I can understand the increasing irrascibility of the hon. Member for Kingston upon Hull, East (Mr. Prescott).
There was a time when Labour could genuinely claim to be the party of the working man, but alas no more. The moment that the right hon. Member for Sparkbrook came to introduce his first Budget—an emergency Budget no doubt, and the first of many at six-monthly intervals—the worker on average earnings would immediately be £3 a week worse off, and we all know that this would be the first down payment on the heavy price he would have to pay for a Socialist Government. Meanwhile, the alliance 1083 parties are in a world of their own—voting against tax cuts, yet accepting them once they are in the voters' pockets, so staying true to their reputation as the party of all things to all men.
The Chancellor's reduction of the standard rate to 27p still leaves him short of our 25p target. I do not criticise him for that. Given the re-election of a Conservative Government, we should see the 25p target reached early in the life of the new Parliament. I believe that my right hon. Friend and his colleagues should start thinking further ahead than that. Targets are important as an expression of the ideal society that we are seeking to achieve for our people. The 25p standard rate should not and must not be the limit of our ambitions. Our aim should be a standard rate of 20p in the pound by the end of the next Parliament. That would leave more of the money that people earn in their pockets and give them more freedom to make decisions concerning theirs and their families' futures. We should not stop there.
§ Mr. Gerald Bermingham (St. Helens, South)
Does the hon. Gentleman agree that the Red Book for this year shows the sale of assets to the value of up to £5 billion? Yesterday we heard of the further sale of assets—the BP shares—which will perhaps fetch up to £5 billion on the open market. Will the extra 2p reduction, necessary to achieve the 25p rate, be declared in an emergency Budget after the election and will it come from the sale of this asset?
§ Mr. Gardiner
I am not drawing up the future Chancellor's Budget. If the hon. Gentleman will listen to my further remarks, he will discover how a great many of those on average earnings— once upon a time they might have been regarded as Labour supporters—welcome the disposal of the assets to which the hon. Gentleman refers.
We should not rest content with the sole target of a standard rate of 20p in the pound. Indeed, I believe that the time has come for a thorough review of our direct tax system and that should take place in the life of the next Parliament.
I am sorry that this year, although the Chancellor has cut the standard rate, he has not had room to cut the tax rates at the higher levels—that must be a priority in the next Parliament. However much the shadow Chancellor may scoff, there is ample evidence—as the Paymaster General told us today—that cuts in the higher rate of taxes would lead to an increase in revenue from higher earners. Indeed, if the shadow Chancellor wants to raise an extra £3.5 billion through taxing the rich, he should think about cutting their tax rates rather than raising them. That is the only conclusion to be drawn from the experience in Britain, following the cuts in the punitive top tax rates inherited by the Government, and based on the experience in the United States.
I commend The Sunday Times for the lead it has taken in making clear to its readers the advantage of cutting the top tax rate. That point has also been made by Professor Patrick Minford of Liverpool university. The Wall Street Journal has noted:In Britain as in the United States, reductions in top marginal rates are not a sop to the rich. They are an incentive to participate in the economy. They do not cost the government revenues; they gain revenues.
§ Mr. Barry Sheerman (Huddersfield)
That is based on no evidence.
§ Mr. Gardiner
There is ample evidence.
We must also consider cutting our top tax rates to bring them more closely into line with our competitor countries in the West. It is a sobering thought that, next year, the top tax rate in the United States will be just I per cent. higher than the lowest tax rate in this country. Our top tax earners will pay a marginal rate of 60 per cent. compared to the United States' rate of 28 per cent. Our most successful managers, top researchers and commercial creators are highly mobile and we will not keep them in this country if they are clobbered for taxes in this way.
I see a further target for our Chancellor in the next Parliament—the standard rate of tax should be 20 per cent., the marginal rate should be 30 per cent. for a wide band of high earners and there should be a rate of 40 per cent. for those at the very top of the earning table. In that way we will create a still more vigorous, enterprising and flexible economy.
A further matter on which I wish to congratulate the Chancellor and urge him to project his policies is his encouragement for the expansion of the share-owning democracy. Unlike the hon. Member for Colne Valley, I welcome the news that the remainder of BP is to be privatised and is to be added to the sale of British Airways and Rolls-Royce in the immediate programme. There are now 8.5 million individual shareholders in Britain—three times as many as in 1979.
Let us consider two figures set alongside each other—8.5 million individual shareholders and 10.75 million trade union members. Let us ponder the significant social change that is implied by those figures and by the narrowing gap between them. They are not. of course, totally separate groups, not the two nations as the Opposition would have us believe; they overlap heavily. Thanks to the popular privatisation exercises, vast numbers of today's trade unionists have become direct owners sharing in the wealth of our country and, at the same time, we have given them more control over their unions. That is what responsible society means. I hope that the Chancellor and his colleagues will carry those policies a lot further with more popular flotations of our remaining state industries.
In the next Parliament I look forward to the privatisation of electricity generation and distribution—preferably not in one monolithic unit, hut in competing ones. I look forward to the privatisation of substantial sections of our coal industry with certain pits sold together with the generating stations that they serve. I look forward to the privatisation of the Post Office with counter services taken to more, not fewer, sub-post offices.
I urge the Chancellor and his colleagues to build upon their achievements and to set those targets for us very soon. That will point the way to the even stronger economy and freer society that we seek.
§ Mr. Ron Leighton (Newhain, North-East)
This year the Treasury is awash with money. It has had £6 billion to "give away". That has meant a £3 billion cut in the already low public borrowing requirement to keep the City sweet, and some £3 billion in tax cuts. The figure of £6 billion is interesting and significant because it is the entire cost of Labour's plan to create one million jobs. So the question for the Labour party is not where the money is coming from, but where the money is going to.
1085 Where that money has come from is not a sign of virtue or success. First, it has come from the pre-election credit-financed consumer boom, based on imports from abroad, and on which the Treasury levies VAT. Thus there has been an increase in those VAT receipts. Secondly, there has been the selling-off of public assets— as Lord Stockton described it, "the family silver." British Gas, British Telecom and British Airways have gone and now we are told British Petroleum is to go. This represents the selling-off of the nation's capital. It is using the proceeds for revenue and it is rather like selling the furniture to pay the rent—a disreputable rake's progress. That will raise some £5 billion per annum and will be used to bribe the voters with their own money.
There is nothing virtuous about how the Chancellor has got this money into his hands. However, he could have used it to help those in desperate need. Instead the Chancellor and the Government have cynically targeted their largesse upon those whom they want to induce to vote Conservative at the next election. There is nothing in the Budget for the homeless, nothing on pensions for the elderly, nothing on child benefit for families, and nothing for the 8 million living in poverty, nor for the millions of unemployed. Why is there nothing for them? The Chancellor has written off the unemployed and the poor because he does not expect votes from them. He is widening the gap between the haves and the have nots. The Government hope that there will be enough haves to vote Conservative at the next election. It is as simple and as evil as that.
A married man with two children, on £40,000 a year, will get a tax cut of £8.71 a week. A married man with two children on £4,000 a year, will get 86p. Of course, most of the unemployed pay no tax at all, so they do not even get those pennies. With society being so violently and cruelly divided in that way, it is no surprise to me that the crime rate rises so rapidly under the Conservatives.
While the family silver is sold off to finance the Conservative's pre-election conjuring trick, the real economy has been crippled. After eight years of Conservative Government, unemployment is 2 million higher than it was in 1979; manufacturing output is still less now than in 1979—in other words, we have gone backwards; investment is one fifth lower than in 1979, and that is cumulative; we have a huge balance of trade deficit, which is growing every year; and we have a deficit on our trade in manufactured goods for the first time.
The colossal bonanza of North sea oil revenue has all been dissipated, with hardly anything to show for it. It has all been wasted on paying £20 billion a year to finance the dole queue. Any definition of success that allows mass unemployment is not recognised by me. I have heard nothing in the Budget that helps the unemployed. There was not even a pretence this year that it was a Budget for jobs. The Government's only policy for the unemployed is restart, although we did not hear much about that today.
I am in favour of contact with the long-term unemployed. I was critical when the Government gave up contact with the unemployed in 1982. That was because, in 1980 and 1981, they created so many unemployed that they thought that there was no point in keeping contact because they had nothing to offer them. So I should like to look at the restart programme. I have a copy of the tutors guide to the programme. It conspires to suggest to 1086 the unemployed that their unemployment is really their own fault. The guide says at the beginning that the course isa very first step in becoming competitive in the labour market.It is as if those people were unemployed because they were uncompetitive. The guide continues:It is designed to engender sufficient feelings of confidence and well-being for participants to believe that they are capable".Why did those people become unemployed in the first place? Not because they were incapable or had no confidence. They became unemployed because they were made redundant or because, when they left school, no jobs were available to them.
The note to the tutor for day 2 of the course saysIt has been suggested that a session on 'healthy eating on a limited income' could be an appropriate part of this programme.In other words, those people are to be reconciled to their poverty. That is what the restart programme seems to be about. That reminds me that during the war I heard a story of a meeting when Lady Bountiful came along and explained to the poor people how to make a nourishing meal out of a cod's head. The Socialist at the back of the hall asked, "Who had the rest of the cod?" That is the question that some of the unemployed might ask at present.
The guide says that on day 2 the unemployed have to submit to personal stocktaking. Session 4 deals with strengths and weaknesses. The unemployed have to submit to a strengths checklist. I should like to read part of the list to the House. I hope that hon. Members, particularly Conservative Members, will pay attention. I wonder how many Conservative Members have these personal strengths. These are the questions that the unemployed are supposed to ask themselves:Am I honest, determined, patient, alert, friendly, happy, humorous, generous, caring, gentle, fit, considerate, genuine, skilled, sensible, capable of initiative, energetic? Am I bright, smart, cheerful, positive, trusting and trustworthy? What other personal qualities do I have? What other strengths do I have which are not included in this checklist?I wonder how many of those qualities the Paymaster General would have. I think that we have ruled him out straight away.
I am all in favour of training. I am greatly in favour of an increased training programme. Where a training programme is badly needed is on the Treasury Front Bench. On day 5, in session 4, the guide says:What we will do is to fix a large sheet of paper to each person's back (demonstrate)"—they have to be shown how that is done—and collect a felt tip pen.So everyone gets his piece of paper and his felt tip pen. The guide continues:Then for 10 minutes we will walk round the room looking at people and then writing on their sheets any positive thought or feeling we may have had about them at any stage (ie anything good we have noticed about them).If the Paymaster General were here, and we stuck a piece of paper on his back, I could not think of anything positive to write about him. I could think of some things to write, but they would not be polite. I have some sense of the decorum of this place, so I shall not mention them.
Originally 30 per cent. of the participants of restart were supposed to go on those courses. That was revised 1087 down to 15 per cent. in 1986 because people did not want to go on them. In East Ham. which is in my constituency, only 8 per cent. went on them.
We have here the results of the pilot initiative. I should like to look at what actually happened. A letter was sent to every one of the long-term unemployed. The last sentence was rather heavy:Please note that if you do not keep this appointment or give a good reason why you were unable to keep it, the Unemployment Benefit Office will he told.Oh dear. The letter says that thatmay result in a loss of entitlement to unemployment benefit".That is what those people were told. How is that for frighteners to start with? The people conducting the interviews told me that for the first 10 minutes they have to reassure the clients who come along that it is not a punitive exercise. How long do they have for an interview? The Paymaster General told me some months ago that it was an hour, but it is not—[HON. MEMBERS: "Where is he?"] He is not here. He is checking up on his personal strengths.
The time for the interview is down to 25 minutes, so half that brief period is spent just reassuring people that they are not to be penalised.
What is the purpose of restart? How are we to judge it? Paragraph 1.1 of the report on the pilot initiative says that the aim isto offer them either a job or an opportunity in one of a range of different programmes".If that is not clear enough, paragraph 3.3 says:The counselling initiative was a programme aimed at helping long term unemployed people find a job".That is what it is about—finding a job. That is how we have to judge the programme. The pilot projects were set up in "suitable areas". What is a "suitable area"? It is one with a skillcentre. But we know that the Government have been shutting down skillcentres. In other words, the pilot projects will get a better response than the rest. According to the people who dreamed up the scheme, a skillcentre is essential, but the Government have been shutting them down.
The restart courses are intended to rebuild confidence and improve people's ability to manage on limited resources. Another objective of restart is to help participantsmake more effective and enjoyable use of their time.In other words, people are not going to get a job and will be unemployed so they must learn how to make more effective and enjoyable use of their time. They should not expect a job; rather they should make more effective and enjoyable use of their time because they will remain unemployed for a long time. That is what people are taught on the pilot projects.
One of the items on the restart menu is jobstart. That is an allowance of £20 a week for up to six months to take a low paid job. I have visited my jobcentre and I am certain that some Conservative Members who are interested in these matters will have visited their jobcentres as well. I onlywas told by the staff at my jobcentre that jobstart was "monumentally unpopular".
In East Ham since 9 June there have been only five applications for jobstart and only four were accepted on the scheme. The number of people who gained places on jobstart is 84 per cent. below the national target. Jobstart has been a dismal failure. It has been pathetic, pitiful and 1088 abysmal. I am talking about the practice and what has really happened. I am not talking about theory. That ES what happened in the pilot project.
Many Conservative Members—some of whom are not present this afternoon—do not believe that there are really long-term unemployed people. They believe that there are plenty of jobs available and that the so-called long-term unemployed are up to their necks in the black economy and engaging in fraud. What really happens and what have we discovered about fraud?
Paragraph 6.8 of the "Pilot Initiative to Help the Long Term Unemployed: A Report to the Manpower Services Commission" states that out of the 30,308 people who entered the pilot projectsOnly 5 cases of actual fraud ie people claiming benefit and not declaring that they were working came to light.In other words, there was no fraud. I am sorry to disappoint Conservative Members who may have thought that there was a high incidence of fraud.
I said originally that the objective of the schemes was to provide jobs. How many jobs were provided in the pilot projects among the 30,308 clients who were called in to jobcentres? We have already heard much about jobcentres. The Paymaster General— who is absent from the Chamber—invited my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) to visit the jobcentre. We do not have to look into the crystal ball when the exact figures are available. Out of 30,308 clients, 321 people have been placed in jobs. That is 1 per cent. In my constituency, far fewer than 1 per cent. have found jobs. Those are the facts. If any hon. Member wants to contradict me and quote figures from his constituency, II would be happy to give way.
The conclusions on the pilot initiative in the report to the Manpower Services Commission published in January 1987 state:It is clear that one interview is not enough for most longterm unemployed people.People are called in for about 15 minutes and are then sent for an interview. They are not asked how they got on. They are not called back in for counselling. People are brought into the jobcentre to discover whether they are engaged in fraud and to shake them off the register. However, no one cares about them. We do not want just one interview. We should be genuinely interested in the long-term unemployed and people should be brought in regularly to jobcentres for help.
The pilot project principally showed that there were no jobs available. We hear about the availability test, about the availability of the jobless for work. That is not the problem. The problem is the availability of work for the jobless.
Of course we want the restart programme. However, alongside that programme we want the programme outlined so effectively and capably by my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) of 1 million jobs created in two years, so that when people come in desperate for jobs, and who want to work, we have a programme of jobs available. The sooner my hon. Friend the Member for Kingston upon. Hull, East is Secretary of State for Employment and can give help to the unemployed the better.
§ Mr. Ian Gow (Eastbourne)
At the outset, I want to comment on the speeches that have been made by 1089 Opposition Members. I want to start with what I consider to be the most disgraceful remark made so far in the debate. The right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley), the shadow Chancellor, said yesterday:The most deplorable of all the schemes and inventions are the job clubs."—[Official Report, 18 March 1987; Vol. 112, c. 951.]I hope that the Opposition spokesman who is to reply to this debate will try to find his right hon. Friend the shadow Chancellor—and that may not be a very easy task—and bring him back to the Chamber to explain which job clubs he has visited to provide the evidence upon which he based his disgraceful proposition. I will gladly give way to the right hon. Gentleman if he appears. I hope that whichever Opposition spokesman replies, he will address himself to that important point.
Reference was made in two speeches by Opposition Members to a point which is becoming old hat in this place— that the very welcome and long overdue policy of denationalisation, a policy pursued in the Budget statement and reinforced by the announcement made by my right hon. Friend the Financial Secretary to the Treasury yesterday, amounts to "selling off the family silver". Those words were apparently used by my late noble Friend Lord Stockton in another place. The Opposition fail to understand, and apparently my late noble Friend also failed to understand, that the silver has gone to the British people and the silver is still there.
We have transferred bogus public ownership—that is, nationalisation—to real ownership and the assets belong to the people. I warmly welcome the announcement made by my right hon. Friend the Financial Secretary that we are to continue with the sale of BP shares. That policy was first embarked upon by the right hon. Member for Leeds, East (Mr. Healey) when he was Chancellor.
You have a very accurate memory in these matters, Mr. Speaker. You will remember that it was in the famous letter dated 15 December 1976 sent by the right hon. Member for Leeds, East to Dr. Johannes Witteveen that the sale of BP shares was announced by the former Labour Government. It was announced for the purpose of reducing the public sector borrowing requirement. You will remember a later passage in that letter, Mr. Speaker, in which the right hon. Member for Leeds, East, the present shadow Foreign Secretary, said that an essential element of the Government's policy was a continuing and substantial reduction in PSBR.
Now, on 17 March 1987, some 10 years and three months after 15 December 1976, my right hon. Friend the Chancellor is following that policy of abating PSBR. That policy was set out by the right hon. Member for Leeds, East. However, my right hon. Friend the Chancellor is soundly rebuked by the Opposition for that policy.
The shadow Secretary of State for Employment, the hon. Member for Kingston upon Hull, East (Mr. Prescott), has described a policy which goes back to the old days when the Government borrowed what they dared not tax and printed what they could not borrow. Mercifully, those days are gone for ever so long as my right hon. Friend remains at the Treasury, as I very much hope that he will throughout the next Parliament.
In great areas of economic policy pursued with consistency, and indeed persistency, of purpose since 4 1090 May 1979, we sought to abate inflation, to diminish the size of the public sector, to increase the competitiveness of industry, to extend ownerhsip of all kinds and to create the conditions to give our people the possibility of a sustained chance of fuller employment, an aspect to which I shall return later. It is against the parameters and targets that we set ourselves at the start of the new Conservative Government that the Budget must be seen, because it is all part of that consistent policy which, in every area—including, as today's figures confirm, the creation of prospects for fuller employment— has been a success and increasingly a perceived success.
I wish to make some modest criticism of my right hon. Friend's Budget proposals, although I am in enthusiastic agreement with their general thrust. First, I should like to say a word about monetary policy. There are now only two weapons in the Chancellor's hands to control the rate of monetary growth. I affirm that I am still one of those who believe that inflation is caused not by trade unions or oil prices, not by foreign sheikhs, or even by the European Community so dearly beloved of my hon. Friends the Members for Reigate (Mr. Gardiner) and for Loughborough (Mr. Dorrell). Whatever the failings of the people who live in Brussels—I am glad to see the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) in the Chamber—I certainly do not attribute to Brussels any responsibility for inflation in the United Kingdom. Inflation is caused by Government and can be cured only by Government. It occurs when growth in the money supply exceeds growth in the supply of goods and services.
The Chancellor's two weapons to restrict and restrain monetary growth are, first, interest rates and, secondly, the level of the public sector borrowing requirement. I warmly welcome the very much lower PSBR of £4 billion for next year and I believe that it will help to restrain monetary growth. However, I have not been weaned away—as my right hon. Friend the Member for Brentford and Isleworth (Sir B. Hayhoe) has been weaned away and even my right hon. Friend the Chancellor has been temporarily weaned away—from sterling M3.
I therefore read without satisfaction the words on page 20 of the Red Book:The growth of £M3 rose to 18 per cent. in the early months of 1986–87 and has since remained at about that level.This is some 3 points above the top of its target range".My right hon. Friend the Chancellor explained in his Budget speech why he thought that in current circumstances it would be wiser to eschew any explicit target, but I find myself in respectful disagreement. I believe that it would have been better to set a range within which our target for the growth of sterling M3 fell, although I have, alas, to concede that in recent years we have been unable to stay within the target range set either by my right hon. Friend or by his predecessor.
An important aspect to which my right hon. Friend the Chancellor made only passing reference in his Budget statement is that of mobility. My right hon. Friend rightly said at column 825 of Hansard for 17 March that his proposals in relation to pensions would be "good … for labour mobility". Apart from the pensions difficulty to which my right hon. Friend turned his attention in the Budget, there is another highly significant obstacle to mobility. As all legislation affects the Treasury and as my right hon. Friend the Chancellor, like my right hon. and learned Friend the Paymaster General, has a key interest in mobility, I must say to my successor who is to wind up 1091 the debate today that I hope that as a high priority in the next Parliament the Government will address their mind and their legislative attention to removing the greatest single obstacle to mobility— the inability of peopel offered jobs in another part of the country to find accommodation for themselves and their families.
A significant step in that direction would be to liberalise—I say this in the presence of the right hon. Member for Hillhead—the law governing landlord and tenant. If we said that in respect of all new lettings the term of the tenancy and the rent that could be charged would be as agreed between landlord and tenant rather than as determined by the Rent Acts, I believe that a significant amount of currently unused or underused property would he brought into use and new investment would be attracted to the private rented sector. It is a scandal that there is empty accommodation when people are anxious to move from one area to another to take up employment but cannot do so because of the shortage of accommodation. I appreciate that that is not a direct responsibility of my right hon. Friend the Chancellor, but as he referred to mobility and as I believe that my suggestion would have a greater effect than his welcome changes in regard to pensions I think that it is legitimate to raise the matter today.
I wish to make two further points. I have referred to my anxiety about the rate of growth of sterling M3 as recorded in the Red Book, and I find myself in respectful agreement with my right hon. Friend the Member for Brentford and Isleworth. There seems to be a trio of Members here today who have served as Ministers of State, Treasury—two have already spoken and one is to speak later. I wish that excise duty on tobacco and alcohol had been increased. I wish to confess my sin: I smoke and drink. I am therefore arguing to penalise my own vices. My right hon. Friend did not increase excise duty on tobacco and alcohol—
§ Mr. Madden
Because an election is coming.
§ Mr. Gow
Not because of that.
I am anxious about the growth in the money supply that has taken place recently, and it would be right to increase excise duties, not least because that would enable us to have a further reduction in the public sector borrowing requirement or in income tax.
It is a matter of legitimate debate whether any income tax concessions should be distributed by raising the thresholds, diminishing the basic rate or altering the hands. I have always thought that a starting rate of 29 per cent. for the last financial year, or 27 per cent. this year, is far too high. As a result of my right hon. Friend's Budget, a single person earning £47 a week will pay 27p in tax on the next pound that he earns. A married couple with an income of £73 a week goes straight from no tax on the first £73 to 27 per cent. on the next pound. No other step on the ladder of higher rates of tax is as high as the first step. One goes from nought to 27 per cent., and from 27 to 40 per cent., which is another 13 per cent. One continues upwards in stages of 5 per cent.
I believe that it would have been right— I have argued the point before with my right hon. Friend the Chancellor—to have a lower rate of tax. That would be important in tackling the poverty trap, which means that those who have been offered— and have accepted—relatively low-paid jobs find that their net take-home pay is little more, and sometimes less, than the sum that they received when they were unemployed.
1092 I give the Budget my warm approval. It is consistent with the policy that we have been following for the past eight years. Sound money, honest finance, greater incentives for our people and a wider extension of ownership are all essential to a more successful Britain. They are important also for a Britain that has recovered its sense of individual responsibility and pride. I hope that my right hon. Friend the Chancellor will present many more Budgets in the next Parliament.
§ 7.6 pm
§ Mr. Don Dixon (Jarrow)
I congratulate my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) on his excellent speech. It was effective, relevant and aimed at the needs of the vast majority of people in this country, unlike that of the Paymaster General and Minister for Employment.
On Tuesday, I listened to the Chancellor of the Exchequer for almost an hour and never once did I hear him mention the millions who are unemployed, mostly because of the policies of this Government. I wondered at times whether we lived in the same country or even on the same planet.
I shall confine my remarks to the thousands who are unemployed in the north and, in particular, in my constituency. The Budget does little or nothing for such people. The Government do not seem to think that life exists north of Watford. In the north, we have unemployment of 163,902 men and 64,493 women. In Tyne and Wear 72,695 men and 26,268 women are out of work. One of the best job agencies in the area was the Tyne and Wear metropolitan county council, which the Government abolished 12 months ago.
In my constituency 6,029 men are out of work; 16.2 per cent. have been out of work for more than a year and 32 per cent. have been so for more than two years. One thousand nine hundred and ninety three women are out of work; 17.3 per cent. have been out of work for more than a year and 23.5 per cent. have been so for two years or more.
Such people are human beings— breadwinners, one-parent families, youngsters who went through the education system—and they are now being thrown on the human scrap heap because of the policies of the Government. They are, as I say, human beings. not figures. This week I have heard about £6 billion, £4 billion, £20 billion, and £2 billion, but those figures are not relevant to ordinary people. People are out of work: they want a job and the dignity of a pay packet, so let us have none of the nonsense that we:heard from the Paymaster General.
The Paymaster General talked about job clubs. My hon. Friend the Member for Newham, North-East (Mr. Leighton) has already discussed the restart programme. How on earth can the job clubs in Jarrow help 9,000 people when the jobcentre has only 123 job vacancies? That is nonsense and a con.
There is in our area an advertisement in which two chaps are seen walking along the road. One asks the other where he is going, and he replies, "To the pub." The other suggests that they go to the job club where they can get a telephone, papers and training for interviews. So the first man goes along to the club, as if he were going to get a job.
I am a great believer in putting myself in Gilligan's place. Can any hon. Member imagine himself being out of work for 18 months or two years? I have been out of work 1093 on a number of occasions, once for many months. After being out of work for a while, one does not bother to get up in the morning. One lies in because there is no point in getting out of bed.
One morning a noise is heard in the passage, so the wife goes out to investigate. Suddenly, a squeal is heard; the wife comes back with a letter and says, "You must go down to the job club." The man has been out of work for 18 months so he goes along to the job club, where the interviewer says to him, "Look here, Dixon, I believe you have been out of work for 18 months. What do you do?" "Well, I am a ship's carpenter," I say. "I am sorry, but there are no ships to repair or build now."
At one time one could walk across the River Tyne because there were so many ships tied up at its sides. Now there are no ships at all. So the interviewer says, "I am sorry, you have no chance of getting a job as a ship's carpenter. Can you do anything else?" "I have built my own house". "That is no good, either. We are not building any houses now. Eight years ago the council in south Tyneside was building 700 houses. This year it is building only 26. There are still over 7,000 people on the housing list but the council is building only 26 houses. Therefore, there is no chance of getting a job building houses, even though you built your own house. Is there anything else you can do?" I might then say, "When I was in the Army and I was on jankers I used to get sent around the officers' quarters cutting the grass with a pair of scissors." The interviewer would then say, "Bingo, we can fix you up. The local authority has just paid off its gardeners and we are setting up a community scheme to cut the grass in people's gardens. We have made it. We have found somebody at last". That is what the job clubs do. It is nonsense. The Paymaster General talks about the job clubs helping 9,000 people in Jarrow but there are only 123 vacancies at the jobcentre. He is talking nonsense and he should know that.
My hon. Friend the Member for Kingston upon Hull, East pointed out how the Government massage the unemployment figures. Last week a couple came to see me in my surgery. The husband had been out of work for 12 months. He applied for a community programme place but was told that he could not take part because his wife was working full time. It was suggested that he could be fixed up on the community programme if his wife stopped working. Therefore, his wife finished work. She cannot go on the unemployment register because she is a married woman. He came off the register and joined the community programme and the unemployment register is reduced by one. If one multiplies that up and down the country one can see that that is how the figures have been fiddled for a considerable time.
I remember when I was first elected. I listened to the Prime Minister saying, "We do not want any artificial jobs, we want proper jobs". A total of 729,000 people are on programmes such as the community programme, the enterprise allowance scheme, youth training scheme, young workers scheme, community industry, job release scheme and the job splitting scheme. When the job splitting scheme was first introduced everybody was going to split jobs but only 250 have been affected. Those are the sort of gimmicks that we have had from the Government since they were elected. They have tried to con the people who are out of work. I have spoken to many people on such programmes and the last time I spoke to some 1094 youngsters they said, "Mr. Dixon, we are not out of work, but we have not got a job." That is the truth and that is what is happening on some of those programmes.
I spoke earlier about the statistics that are thrown about in the Chamber, as if it is an extension of the Oxford debating society. I want to read a letter that I received on the morning of the Budget from one of my constituents.
The letter states:This letter is on behalf of myself and the unemployed. Before Christmas I asked for a grant for cleaning and decorating. I was told when I asked that I could not get a grant because I was not a pensioner or disabled. I still have that letter. I was a fit and healthy person. I would like to know what being fit and healthy and not being a pensioner or disabled has got to do with the needs of people like myself who are unable to find work, who are getting on towards 60 and have been out of work for a considerable time … you have a roof over your head and bread to eat but you are not entitled in this world of high-tech prosperity to ask for clothing or cleaning materials. Hygiene does not come into it. The kettle broke so I asked for a grant for a kettle. I was told, `as you have a pan to boil water in, you do not need a kettle' … This is not the way anyone should be treated on £30.64 who has to pay for heating, electricity and food and that is without the small items that one takes for granted like soap, toilet rolls, underclothes … I will not make a list. Poverty is nothing to be ashamed of but in this year of 1987 we are still living in the 1900s … It is not the people who are at fault. The shipyards and factories have closed … and although enterprise may achieve work for some, small companies cannot employ many people. They cannot employ the elderly like myself who have tried without hope. The young people have little in life to look forward to. What did I work for? What did my father work for and his father work for? They worked for a better world for us to live in not poverty. My grandchildren and their grandchildren I pray will not need or want or beg or appeal to anyone like myself and those unemployed have had to do.That is the sort of person we are talking about. We are not talking about statistics but human beings. That is the sort of misery they are living in as a result of Government policies; and the Budget does not do anything for that person or the others I am talking about.
The Budget will not help the pensioners who are living on the poverty line in my constituency and who are standing in long queues to get the extra pound of butter that the Government or the EEC are prepared to provide. It will not help those who are waiting for hospital treatment. I live in an area where children are more likely to die in their first year of life, be brought up in care, below academic achievers and end up on the dole than anywhere else in the country. Those are not my statistics but the results of the Government's regional trends survey. The Government have proved that from birth to leaving school young people in the north can expect to have a hard time. Of those who find a job, it is estimated that over one third of full-time workers are so low paid that they are barely better off than the unemployed. The Budget has done nothing for them.
I heard the Paymaster General on the "Today" programme a few weeks ago. He suggested that there are people in Newcastle receiving higher wages than those in London. He did not specify who they were or what jobs they were doing. Of course, the chief executive of Newcastle city council will receive more than a library assistant in London. If low wages create employment, we should have no unemployment in the northern region because we are one of the lowest paid areas in the country. He also suggested that wages are higher in the south-east because of the price of houses. The Government should sort that out. One of the reasons why there is a shortage 1095 of housing is that people are taking note of the chairman of the Tory party and getting on their bikes and looking for work. When they get on their bikes they cannot take their houses with them, so that is creating a demand for houses in areas where there are jobs. The Government should be providing jobs where the people are and where they have their houses. That would sort out many problems.
My constituency was mentioned in the Black report as one of those suffering from a lack of investment in the Health Service. I want to read another letter. It is important that we receive letters from constituents and that we start talking about human beings rather than bandying around statistics that are irrelevant to the people who are suffering. The letter comes from a person who lives in Whitburn in my constituency. The letter said:Dear Mr. Dixon, Thank you for your help in my problem to obtain a new fire, which I am pleased to say is now settled. Unfortunately I am once again requesting your help in an extremely serious matter with regard to my health. I am 82 years of age"—[Interruption.]This is no laughing matter. The hon. Member for Banbury (Mr. Baldry) should wipe that supercilious grin off his face. I am talking about somebody who is 82 years old. If the hon. Gentleman listens to the letter he will not be smiling.
§ Mr. Tony Baldry (Banbury)
The hon. Gentleman has been speaking for a long time. He has gone on about Tyneside. None of us underestimates the difficulties facing Tyneside. The hon. Gentleman has read his postbag but we would be interested to hear what he and his party are proposing other than higher taxation, higher public spending and higher borrowing to get his people back to work.
§ Mr. Dixon
We are proposing to deal with the unemployment and the Health Service in this country. My hon. Friend the Member for Kingston upon Hull, East has put the points effectively. If the hon. Gentleman does not like what I am saying he can, like the rest of his colleagues, go and probably spend more on a dinner than some unemployed people have to live on each week. The letter goes on:I am 82 years of age and for the greater part of my life have experienced good health until recently.Some 4 months ago I underwent an operation to remove a growth from my stomach and my health is deteriorating rapidly. In other words I have cancer. I am in serious pain, and I cannot obtain relief from the pain.After my operation I was sent to … rest hospital for two weeks and on one occasion I was in great pain and requested the assistance of the duty sister. She gave me a tablet called Sulpadeine which I took with water and it relieved the pain.Since I came back home, I have attempted to obtain the same tablets, but at one period the tablets ceased to be manufactured".
He was told that he could not get a prescription because the tablets had been put on the proscribed list by the DHSS. This patient was suffering from cancer and sulpadeine tablets were his only relief. Sulpadeine was put on the proscribed list and he could no longer get it. He wrote to me and I wrote to the Secretary of State for Social Services and received a lengthy letter acknowledging receipt of my letter. The letter said:Please assure Mr. Weston that ways in which sensible savings might be made in the drugs will have been and will continue to be sought to release funds for other vital areasI received that letter on 17 February 1986 and wrote immediately to Mr. Weston. I got a reply from his nephew 1096 which said that Mr. Weston had died between the time I received the reply from the Secretary of State and the time that I wrote to him. Mr. Weston's nephew said:My Uncle was very well cared for during his last two weeks in the Hospital … and, but for the change of tablets, would have been a lot easier.That is the sort of public expenditure that we should be talking about instead of talking about taking 2p off the basic rate of income tax. We should be looking after people like Mr. Weston and spending money on the National Health Service. That is what a Labour Government will do.
I have one or two other things to say, but I have spoken for a bit too long. I did not intend to speak for as long as this. I hope that Conservative Members who seem to think that I have spoken for too long will keep their contributions short because a lot of my hon. Friends wish to take part in the debate.
My hon. Friend the Member for Kingston upon Hull, East talked about how we could get people back to work In the northern region 27,000 fewer construction workers are employed now than were employed in 1979. Thousands of people are on the waiting list for houses and those construction workers could be put back to work tomorrow if the Government would provide finance and let the local authorities use the money that they have. received from the sale of council houses. That would have an immediate effect.
The Budget does nothing for my constituents. It does. nothing for the pensioners or the unemployed or for those people who are waiting to go into hospital for treatment. The Government are almost at the end of their present life. I hope that they will go to the country as early as possible and let the people choose between our programme and the non-programme that the Government have put forward.
§ Mr. Charles Wardle (Bexhill and Battle)
I listened with care to the hon. Member for Jarrow (Mr. Dixon). I do not doubt for a second the genuine anxiety echoed in the letters that he read to the House. I am bound to tell him that he would have served his constituents better if he had spelt out precisely what he has in mind for improving the economy, and had faced the fundamental errors in the management of the economy in the second half of the 1970s.
Like many of my hon. Friends who have spoken in the debate, I welcome the sound approach and the constructive measures taken by my right hon. Friend the Chancellor. His Budget reflects a significant advance on several fronts in the British economy. The economy is now benefiting not simply from higher levels of public expenditure but from better targeted spending, lower borrowing and steadily reducing taxes. Taken together, these trends present an encouraging prospect for future prosperity and for job creation that would have seemed quite unthinkable during the sorry period of economic mismanagement under the last Labour Government.
Before I mention some specific aspects of the Budget, I shall comment briefly on the media treatment during the run-up to Budget day. The media have long regarded the Budget as one of the great moments of spring theatre along with the Boat Race and the Grand National. There has always been a good deal of speculation before the event, but this year the press surpassed itself. With a few notable exceptions, the editorial copy was long on predictions and 1097 relatively short on an analysis of how the economy has been transformed from its fragile and fractured condition before 1979, with rampant inflation, huge borrowing and low productivity, to its present robust form.
That transformation has been achieved in spite of the savage worldwide recession that struck in 1980 and that took its toll of overmanned industries, and in spite of the more recent massive fall in oil prices. In view of what happened to oil revenues and the following reappraisal of sterling in the currency markets, it is not surprising that the Chancellor adopted a cautious stance in his forecasts in the last autumn statement. It is all the more rewarding that the economy has proved so buoyant.
A combination of productivity improvement and greater competitiveness of British industry in world markets from the fall of sterling against European currencies, notably the deutschmark, has continued to fuel company profits, to encourage expansion of private sector capital investment and to stimulate job creation. As a result, Britain is now at the top of the European economic league for growth in GDP in which we languished in the relegation zone for so long in the late 1970s.
In order to maintain and improve our position and to place the substantial spending plans contained in the last autumn statement in the context of a consistently prudent policy, the Chancellor had to make a large reduction in his PSBR target. If he had not done so, not only would there have been an outcry about an election spending spree, but there would have been some fundamental doubts in the world money markets about a resumption in inflation and a rapid erosion of the advantages that have accrued over the last eight years.
The fact that he cut the PSBR by more than most observers had anticipated and still reduced the basic rate of income tax by 2p is a portent of many good things to come. It means that the incentives for initiatives and enterprise will continue to improve and that sterling is likely to hold up well in the currency markets allowing a gradual drop in interest rates and, hopefully in due course, in mortgage rates. Above all, it means that a challenge has been thrown down to the Opposition, who have made it quite clear that they want to see higher public sector borrowing and increased taxes. That challenge will not be overlooked by the electorate in the months ahead.
Of the several other sound measures announced by the Chancellor I shall briefly mention three. The help to be given to the over-80s by way of a special increase in the age allowance at double the rate of inflation is an important recognition of the special needs of that age group. The same is true of the 50 per cent. uplift in the blind allowance. On a separate front, the Chancellor's help for small companies by way of VAT reforms and especially the means of cash accounting for VAT are most welcome. Along with the help that he has provided on profit-related pay for employees this year and the assistance in previous years by way of the business expansion scheme and lower rates of corporation tax for small companies, the Chancellor has done a great deal to stimulate the prospects for small firms and thereby the prospects for employment.
Of the items which my right hon. Friend the Chancellor did not include in the Budget, I single out two for his consideration in the future. One is some form of tax incentive for research and development along the lines that he has targeted for research and development in oil 1098 companies. The other is a lowering of employees' national insurance contributions for those on lower incomes, so that along with the tax reductions there can be help to deliver more take-home pay for those on the fringes of the poverty trap where the financial net incentive to work is only marginally more than the income from supplementary benefit.
In the final analysis, this debate is likely to revolve around two vital issues that distinguish the success of the Government's policies from the muddled economic thinking of the Opposition parties. Those two issues are capital spending and jobs. Bearing in mind the increase of over £4 billion projected in the autumn statement for the year ahead, it is nonsense to suggest that the infrastructure is being depleted. More is being spent on roads, railways, hospitals and other essential parts of an improving infrastructure. Capital spending in the public sector now stands at £22 billion. I make no apology to the hon. Member for Jarrow, who is leaving the Chamber, about quoting these figures.
That figure of £22 billion is on top of £5 billion being spent on major maintenance projects in the infrastructure. A record £60 billion is being spent on the combined public sector and private sector capital investment. It is little wonder that new jobs are being created. We do not hear often enough that nearly 24 million people are working, that I million new jobs have been created since 1983 and that a higher proportion of the working-age population is now employed than in any other European country.
It has become entirely predictable, in debates on the economy and on employment, that the hon. Member for Kingston upon Hull, East (Mr. Prescott) and his hon. Friends will make the sort of anlaysis of employment that we have heard from them today. They have learnt nothing from what happened under a Labour Government a decade ago, but continue to prescribe their familiar nostrums in which public expenditure of unrealistic proportions is claimed to be the cure—all for unemployment. By job creation, Labour Members usually mean more public sector employment. Yet anyone who works in manufacturing industry could tell them that the greatest single cause of unemployment is that companies price themselves out of the markets that they supply. They lose orders and have to cut jobs.
By far the largest component of the prices that those companies charge for their products is the payroll cost. That does not simply mean the salaries and wages paid to their workers; it also includes the payroll element in the cost of materials and of utilities such as gas and electricity, and of the rates that they pay. Real gains in employment can arise only from increased competitiveness, which means that pay increases must be matched by improvements in productivity. That is the way to achieve a greater market share, more orders and more jobs.
It would be cosmetic and utterly irresponsible to use substantial extra Government revenue— whether it is borrowed, with the inflationary threat that that implies, or taxed—merely to create more non-productive jobs in the public sector. The burden of costs would then land on the wealth creators, and without successful wealth creation the country could not continue to afford the social priorities that hon. Members on both sides of the House would agree are essential for the protection of those in genuine need. To promote ever more public sector jobs and to create subsidised employment in the private sector that makes businesses less competitive is not an industrial policy or an 1099 employment policy; it is a farrago of empty promises whose effect would put the country back into the miserable economic decline of the late 1970s, when the Labour Government aspired to a national lifestyle that could not be afforded and ignored the damage done to our competitiveness by inflation.
In contrast with those unworkable policies, the Chancellor's Budget was prudent. It will sustain the present encouraging rate of economic growth; it is good for business, and therefore must be good for jobs in the longer term. Perhaps most important, it has reintroduced to our nation an aura of success that is long overdue.
§ Mr. Peter Pike (Burnley)
I do not intend to pursue the line that the hon. Gentleman has been pursuing, but I shall respond to the speech of my hon. Friend the Member for Jarrow (Mr. Dixon). My hon. Friend is absolutely right about the issues which concern the overwhelming majority of people, and which will determine the result of the next general election.
I do not believe that those people, who must clearly see that the Labour party will tackle those problems, are asking for anything unreasonable. They have a right to expect a job, and a job with reasonable pay and conditions; they also have a right to expect a decent home that they can keep clean, warm and dry. They have a right to a Health Service—based on need and not on ability to pay—which spends much more money on preventive medicine and early diagnosis, and to decent educational opportunities for their children. But all those rights are being adversely affected by the Government's policies.
When the hon. Member for Eastbourne (Mr. Gow) referred to the selling of public assets— the socially owned industries—— he failed to say, as the Government always fail to say, what they will do when there are no more publicly owned industries to sell. I have asked them that time after time, because they are now using their money to meet other items of expenditure.
Assets cannot be sold twice. Once they have been sold, and the capital receipt has been used, those assets are gone for ever. The Government are also forgoing the income that they would have received from such industries, which, in the main, have been trading very profitably for many years. I challenge the Government to say what they intend to do when they have no more assets to sell and nothing with which to plug the gap. They are cornering their position by saying that they want to continue reducing taxation at the same time.
When the Paymaster General opened the debate, he had the nerve to call this Budget a Budget for jobs. Of course, it is not the first time in recent years that a Budget has been introduced by the Government as a Budget for jobs. Yet they have failed to solve the problem of unemployment. The 2p reduction in the basic rate of income tax was wrong, given the opportunities available to the Government. Such reductions benefit the higher paid much more than they benefit the lower paid. The Government would have done better to look at the thresholds rather than simply increasing them by 3.7 per cent. in accordance with index linking. However, in their place I should not have been tempted to use the available resources for tax handouts.
The Paymaster General referred to the 1.5 million people whom the Government had taken out of the tax bracket by increasing the threshold. I am not sure whether 1100 his comparison was fair. Unless the Government have broken the resolution made in the Finance Bill Committee some years ago, they must index-link. I accept that on one or two occasions they have gone beyond the existing commitment.
When they take 1.5 million people out of taxation, the Government should also take into account the fact that those people have been heavily affected by increases in VAT and in national insurance contributions. Most of them are far worse off as a result of the change in taxation emphasis. Yet, almost as soon as the Conservatives had won the 1979 election, the highest earners benefited from tax reductions from 83 per cent. at the top to 60 per cent.
§ Mr. Bermingham
Perhaps we have had the first smell of the same thing again. I asked earlier about the £5 billion of BP shares. Does my hon. Friend smell a possibility that the figures that were not disclosed in the Red Book may be the handout that will be given to the rich after the election?
§ Mr. Pike
I am sure that my hon. Friend is right. One reason why the reduction has been limited to 2p was to keep something in reserve, and the Government are to sell additional assets for that purpose. I have no doubt that they will say, "Vote for us at the general election and we shall give you another 2p off the basic rate of tax."
The reduction in the basic rate will not benefit the low paid who are not taxed, or those who are on benefit. One of my constituents, a Mr. Lord, aged 84, telephoned me just before 11 o'clock on Friday of last week. He said, "Do not the Prime Minister and her Government realise that a 2p or a 4p reduction next week will be of no benefit to me, or to millions of other pensioners?" I tried to explain to him that we had been telling the Government that almost continuously over the past 12 months, but that they failed to recognise it, that they did not want to recognise it and that they will not face reality.
While those who have mortgages will benefit once the fall in interest rates takes place, although for the interim period they may be paying slightly more, those who are paying rent will not have that benefit, and once again they will be the losers. The Burnley and Pendle constituencies, covered by one DHSS office, have a population of about 165,000. There are now 16,857 claimants on supplementary benefit, as compared to 10.483 in 1979. What is more, the population is smaller than it was in 1979. Many people have taken the advice of the Chancellor of the Duchy of Lancaster and moved elsewhere to get jobs. That means that 6 per cent. of the housing stock is empty, but there is little point in attracting people from areas with a shortage of housing because all they can do is immediately add to the massive level of unemployment.
The housing benefit situation is also significant. In Burnley in 1979–80, 5,332 people were receiving housing benefit but in 1986–87 the figure is 10,765. In Pendle, the figures are 5,460 and 12,670. Those figures show what has happened to the people as a result of eight years of Tory Government.
The Paymaster General referred to the Liberal and Social Democratic parties. I do not call them an alliance because they are an alliance only for electoral purposes. They are clearly two different parties, and they are not even represented by one hon. Member at this stage of the debate. The Paymaster General referred to their policies of statutory incomes. However, the incomes policy of his 1101 party is to argue for low pay. The Paymaster General is on record as being against national wage negotiations and settlements and for low pay because, he says, it leads to job creation. In 1979, when the Conservative Government were elected, they argued for free collective bagaining, but they have used the biggest possible weapon against that system—the threat of unemployment. In other words, if one does not toe the line, one will be out of a job.
My hon. Friend the Member for Jarrow made an interesting point about the north-east which applies also to the north-west and to Lancashire, where low wages have been traditional but where there has been a massive decline in job opportunities and availability of work for the people. In the autumn statement it was announced that there would be a massive increase in public expenditure. In all the questions I have asked of various Ministers, I have yet to find a single public sector department in my area that has benefited from this alleged increase. The allocations for education, housing and the Health Service are all down. All these key services are being reduced. I do not understand where the money to which the Government refer is going.
I welcome two little measures in the Budget. The first is the move on unleaded petrol. The reduction in tax on such petrol is environmentally correct, and we should ensure that people are not penalised by a higher cost factor if they want to use such petrol. I also believe that some of the measures to assist small businesses will help them, so I welcome them. I do not decry the direction in which the Government are moving.
The Government's special measures for jobs will not tackle the problem of unemployment. I do not say that job clubs and restart have nothing to offer or that everything is wrong with them. However, I believe that restart would be far better if it were a two-week programme rather than a one-week programme because the good restart programmes are trying to push too much into one week. The job clubs also have something to offer, but at the end of the day the key factor is whether they create new jobs. They may assist those who have been long-term unemployed to get a job or get into training, and I do not dispute that that is so in a number of cases, but they affect only a small percentage of those who need help.
The Paymaster General referred to the constituency of my right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) and said that 72 per cent. of the people who had gone through the job club there had been able either to get a job or go into training. However, that will be only a minute percentage of those affected. My right hon. Friend said that there is 51 per cent. male unemployment in that area. This scheme affects only the surface of the problem. It is not a totally wrong idea, but we have to keep it in perspective and recognise that we need to do far more if we are to move in the right direction. Many people who go on the job training scheme will be involved in travelling costs and have to pay for meals, and will in many cases end up worse off financially than they were when they were on the dole. That has to be nonsense, and I hope that the Government will reconsider this aspect of the matter.
I asked the Department of Employment, and I have received an answer today, how much of the money used to finance the job training scheme was new money and how much was allocated from other sources. It is strange 1102 that, although the question was tabled for answer yesterday, I received only a holding answer yesterday. The answer today tells me only that I can go to the Library and find the information. I would have thought that such information would be to hand in the Department, and the Minister could have given those figures and shown how much of that money is new.
The Government have to look at projects such as the Leeds and Liverpool canal corridor which is a scheme being pushed in the north-west by the Lancashire county council and the councils in the Merseyside area. It has the support of borough councils and political parties. There is an area of great dereliction with much unemployment. If the scheme is to go ahead, it needs support and financial assistance from Europe, from the Government, from the private sector and from local government. With full support it could help to create jobs, generate growth and improve life along that canal corridor. One must remember that in Yorkshire and Lancashire that canal produced great industrial wealth in the late 18th and early 19th centuries. It is important that we regenerate the area and make sure that once again it plays a role similar to its original role, when it was an asset, not a drain on the area.
The number of people who have not had jobs since they left school is a significant and important factor. I can give the figures for the north-west, using information from an answer from the Under-Secretary of State for Employment, the hon. Member for Rossendale and Darwen (Mr. Trippier). He said that in the region 44,118 unemployed claimants had never had a job since they left school and, within that figure, 12,073 were aged under 18. We really should be concerned about the fact that when people leave school they have no opportunity of getting a job.
I want also to refer to some of the figures because they are indicative of the way in which Government have assisted industry. I asked a question about the assistance, expressed in 1985–86 values, given to industries in the north-west from 1976–77 to 1985–86. In 1976–77 it was the equivalent of £143,495,000 and in 1985–86 it was £75,108,000. I stress that the figures are in 1986 comparative values and it was the Minister who gave me the answer. So it shows that we are giving only half the assistance to manufacturing industry that we were giving some 10 years ago.
Manufacturing industries are the bread and butter of our nation. I do not decry the importance of small business or tourism or of the service sector, but in the end this is a manufacturing nation. We have depended on our manufacturing base in the past and will do so in the future. But I fear for the future when the Government talk of a £7.5 billion trading deficit on manufactured goods and do nothing to rectify the situation.
I asked the Paymaster General what reduction there had been in manufacturing jobs in the north-west. It has to be said that the north-west is primarily dependent on manufacturing jobs and my part of the north-west, northeast Lancashire, is dependent above the average. He replied that the figure in June 1979 was 971,000 and that in September 1986 it was 638,000, a decrease of just over 34 per cent. What an appalling record that is. The Minister indicated that there were one or two qualifications on that and I have to say, in all fairness, that there will be some qualifications that he does not mention in the other direction; but time prevents me from going into the detail of them.
1103 I accept that some of the changes have come about as a result of new technology. As a shop steward in industry before being elected to this House, I accepted that if we wanted to continue in business and to carry on employing people we would have to accept change. But we have to get our manufacturing industry into surplus, and the Government should be doing something about rectifying the appalling present situation.
The north-west spokesman for the Confederation of British Industry, the regional director, Mr. Andrew Toop, speaking at a meeting just before the Budget on interest rates, said that he welcomed the previous week's reduction of 0.5 per cent. which he said would save industry and commerce about £125 million a year. He went on to say:It is the level of interest rates against our competitors which is the biggest single factor that prevents our business climate improving more quickly and at the same time restrains investment and overseas sales.He also said that in the previous year the United Kingdom's real interest rate was 7.2 per cent., compared with 4.9 per cent. in West Germany, 4.8 per cent. in the United States and 4 per cent. in Japan. He went on:In a medium-sized manufacturing firm employing 300 people this could mean an extra £150,000 on their costs every year, which could make all the difference when competing for contracts.That is important. I recognise that there has been a further reduction following the Budget, but we still have a long way to go.
We have to accept that manufacturing output is still lower than in 1979. I acknowledge that productivity is higher but output is still lower and investment in manufacturing is also still lower than in that year. Those figures must give concern to all hon. Members. I hope that hon. Members on the Government Benches will not dismiss this fact.
My final point is a plea for north-east Lancashire. We have been trying to persuade the Government to give us an extension to our enterprise zone. Enterprise zones have many faults but ours has been extremely successful. We have applied for an extension and have been told that the Government have put all these applications on ice. If they were to give us that, it would he one small move in the right direction. If they were also to connect us to the main motorway network, it would, at least in one small part of the country, be a good move. But the Government have many lessons to learn, and I believe that the Paymaster General was completely wrong to describe this as a Budget for jobs.
§ Mr. Tony Baldry (Banbury)
This debate takes place against a further monthly fall in unemployment of some 71,000, the biggest monthly fall since records started in 1971. This is the seventh consecutive month of a consistent downward trend in unemployment which has fallen by 150,000 in the past seven months, an average fall of some 20,000 every month. This substantial fall has occurred without any change whatsoever in the methodology by which the unemployment statistics are compiled. This month's fall, in particular, is all the more noteworthy because the 71,000 do not involve any extra places on training schemes.
But this is not the only consistent fall in unemployment figures that demonstrates the real and steady improvement on the jobs front. Unfilled vacancies are standing at their highest level this decade. One does not have to look simply 1104 at the official statistics to see this. A glance at the jobs page of every major local and provincial newspaper tells the same story. In the west midlands, the Birmingham Evening Mail has seen recruitment advertising rise by 40 per cent. in a year. In the north-east, the Newcastle Evening Chronicle has seen a 30 per cent. increase in advertising revenue. In Wales, the Cardiff Evening Echo has seen a 16 per cent. increase, and in the north-west the Manchester Evening News has seen an annual increase in recruitment: advertising of 11 per cent. No wonder the CBI suggests that there is three times more work available than official figures suggest. The CBI puts the figure of unfilled vacancies at well over 600,000, and probably nearer 750,000—three-quarters of a million jobs waiting to be filled.
That there has been this degree of recovery should not be a matter for surprise. In the past three years our growth has averaged around 3 per cent. We have had high growth combined with low inflation, a combination that has not been achieved for a generation and a combination certainly never achieved under a Labour Government. Investment is at record levels; company profitability is at its highest for over 20 years; productivity is up by more than 30 per cent. since the end of 1980; and manufacturing output is at its highest since 1980. Throughout the 1980s Britain has had the highest growth rate in the European Community. Manufacturing and productivity during this period have been growing at the highest rate of any leading industrial nation. Britain is the only major country whose export volume is rising, the only economy in the European Community for which forecasters are now more optimistic than they were this time last year.
This is the background for this year's Budget. There seems to be some confusion in the minds of some of the media and the Opposition parties as to what the Budget is all about. It is not about how much the Chancellor should give away in public spending. That is determined in the autumn statement. Let us not forget that last autumn the Chancellor gave away £4.75 billion in public spending, including £1.25 billion for local government spending, much of it for extra pay for teachers and extra resources in our schools, £600 million more on health and personal social services, £450 million more on housing investment and £65 million more for new roads. So massive amounts of money are being spent on the infrastructure, on new roads, new schools, new hospitals and new housing. In my area alone we see work starting this year on the M4 motorway extension from Oxford to Birmingham and £12 million being spent on new buildings at Horton hospital.
Nor is the Budget about how much personal benefits such as pensions should be increased. That will come at the next benefit uprating. But let us not forget that pensions have gone ahead faster than price increases. Between 1979 and 1985, the average weekly net income of pensioners has risen by 18 per cent. in real terms, more than twice the increase for the population as a whole. Under Labour the average annual increase in pensioners' income in real terms was 0.6 per cent. Under the Conservatives, there has been an annual increase of 2.7 per cent.
So the Budget is not about public spending, or about the whole range of uprating benefits. The Budget is the occassion when the Chancellor decides not what he will give away but rather what he will take by way of taxation.
1105 In framing his Budget, the Chancellor has clearly heeded the advice of those such as Sir Terence Beckett of the CBI, who observed a little while ago:We shall not move into better scenarios unless bold decisive action is taken to reduce the share of national expenditure taken by the state.He continued:Our overriding objective must be to reduce the proportion of economic resources passing through Government hands…The freeing up of enterprise is the best single way to create more jobs.
§ Mr. Prescott
He has Tory backing.
§ Mr. Baldry
If the Opposition parties cannot heed this, perhaps they should recall the advice of the shadow spokesman on trade and industry, who is hardly a Tory hack. He said:We must persuade people that wealth creation is the key to creating jobs in the caring industries like the hospitals. Socialists must interest themselves more in the creation of wealth and not just in the redistribution of wealth.We have heard little in this debate from Opposition spokesmen about how wealth creation should take place. Wealth creation must be right. Stimulating enterprise is not just the best way to create new jobs; it is only free enterprise that can give people political liberty. If the state starts to take all and if it starts to spend all, sooner or later we will all become serfs of the state. Conservatives wish to see not a nation of serfs but a nation of free men and women. That is why it is right as a matter of practical politics and as a matter of principle that the state should not take from the individual any more by way of taxation than is absolutely necessary.
Those in the Labour party and in the SDP who want higher taxation want greater state control. Let there be no mistake. The Labour party and the SDP are both parties of high rates and high taxation. Before they seek to impose even higher taxes, Opposition spokesmen might like to consider other nations.
In the United Nations the top rate of tax is at approximately the same level as our basic rate. It is perhaps no coincidence that the United States is an economy that has been consistently creating thousands of new jobs and that the job-creating momentum is led by smaller businesses. In the United States small firms have been the driving force in creating jobs. In the past 10 years, 20 million new jobs have been created by firms employing fewer than 20 people, firms that receive not a penny of public subsidy. In Britain also it is smaller businesses that are creating new jobs, real jobs, and this Budget is of considerable benefit to smaller businesses.
§ Mr. Bermingham
Does not the hon. Gentleman agree that the way the United States got its economy going was by deficit loaded funding; that is, the state went into deficit and the national Government borrowed money which was reinvested in the country.
§ Mr. Baldry
The Labour party just cannot believe that it is possible to create jobs in any other way than by higher public spending. So when one sees an enterprise economy, and jobs being created by enterprise, the Labour party has to find some reason why that has not been done by enterprise. New jobs in the United States have been created because the state has created the climate for entrepreneurial activity.
1106 The Budget has been good for smaller businesses and for those who are creating new jobs. Tax has been reduced for unincorporated businesses and for the self-employed. There have been successive reductions in small business corporation tax from 42p to 27p. There has been steady expanison of the business expansion scheme which has helped fill the venture capital gap. That has helped to stimulate the growth of smaller businesses by some £400 million. Indeed, between 1979 and 1985, venture capital in Britian has increased by 40 times, so that Britain now accounts for almost half the venture capital in the whole of the European Community.
The changes in the VAT system will help some 800,000 businesses, will be of positive assistance to cash flow and will mean that businesses will not have to pay VAT if they are not paid by their customers. Small businesses will also be greatly assisted by lower public borrowing, which will mean lower interest rates and lower costs for industry.
Those who wonder whether this is a Budget for jobs should simply ask those who are creating real new jobs how they see the Budget. They will find an almost universal welcome and the feeling that the Budget will create a climate that will assist investment, encourage enterprise and make real job creation more likely.
§ Mr. Gerald Bermingham (St. Helens, South)
I listened with interest to the hon. Member for Banbury (Mr. Baldry). When I intervened I was trying to help him but he was not prepared to accept crumbs or pieces of advice from the gods, such as his Front Bench has accepted from last year, as I shall explain in a moment. If the hon. Gentleman knew anything about economics, he would know that the United States got its economy going by borrowing vast sums of money, going into deficit and reinvesting in the economy. Lo and behold, what did it do? It began to create wealth.
What have we seen in this Budget? The Chancellor has said that he will cut the PSBR from £7 billion to £4 billion. In other words, we will not borrow as much money. Therefore, we will not invest as much in the economy and we will not create as many jobs. If only the Government would listen occasionally. I have to claim some success in making them listen. Last year I had— I was about to say the privilege—the pain of serving on the Finance Bill Committee. That may have proved to have been a pain not only to the Government but at times to my own Front Bench when I moved amendment after amendment.
One amendment proposed the removal of on-course betting duty. A year later the idea put forward by cross-party Members, including myself, has found favour with the Government. On-course betting duty has now gone. That is a great boon to racing. We put the proposal to the Government a year ago and somehow the message got home. Obviously someone else pressurised the Government. That is one of the few proposals that I welcome in the Budget.
I see my own Front Bench nodding at me almost sagely, as if to ask what my ideas are for this year. The obvious one is that the whole Treasury team should resign, that we should have a general election to get rid of the whole shower and that we should get back to running the economy properly.
Yesterday I listened to the Chancellor talk about helping small businesses on VAT and other matters. As he spoke, a thought flickered across my somewhat tired mind 1107 about the correspondence that I have been having with the Treasury, with Inland Revenue officials and with VAT officials. Somewhere someone has forgotten to tell the people who work for the Inland Revenue, and particularly those who work for the VAT authorities, that small businesses have had a rough time in the past few years, not of their own making but because of Government policies and the international economic scene. I do not wish to assign blame for causing the small businesses to have trouble. The outcome has been that a number of these businesses owe the VAT authorities considerable sums of money.
One business in my constituency owes the VAT authorities approximately £20,000 and it also owes the Inland Revenue approximately £20,000. Business is beginning to take off for that small company. I wrote carefully to the Chancellor and to the people dealing with VAT as did everybody else, for example, the accountants and the banks, because it now appears that the VAT authorities and the Inland Revenue are seeking to wind up the company, notwithstanding the fact that, during the past 12 months, many thousands of pounds have been repaid in VAT and tax. In addition, all current payments due are bang up to date and the arrears are steadily being paid off. Will the VAT authorities and the Inland Revenue allow that company and its nine or 10 jobs to survive? I suppose that that is not many jobs to the mandarins in the Treasury or to the sharks in the VAT authorities. However, in my constituency, which has more than 20 per cent. unemployment, those nine or 10 jobs, and the hope of more jobs, mean something.
Therefore, I make one more plea to the Minister. Can somebody please tell those who are in charge of collecting VAT and income tax that if all current payments are steadily being made and the arrears are being paid off, they should allow such small businesses the hope of success and the time to pay? I know that if they ask for two or three years to pay off the arrears that have accumulated during several years of hard times that may seem a long time. However, jobs will be protected, those little businesses will continue to grow, more jobs will be created and eventually the Inland Revenue and the VAT authorities will get their money. If one goes the other way and decides to liquidate those companies, jobs will be lost, small businesses will close, the authorities will not get their money and everybody will he the loser.
However, that idea uses intelligence and common sense and I toss it across the Chamber as last year, in Committee, I tossed an idea to the Minister. Perhaps he will find the time to pick it up as he found the time to pick up my idea that on-course betting duty should be abolished. Wisdom came slowly to the Minister.
§ The Minister of State, Treasury (Mr. Peter Brooke)
§ Mr. Bermingham
I see the Minister nodding sagely and smiling. He learned that lesson.
Twice tonight I have carefully intervened to ask about British Petroleum because, as a lawyer, I am naturally suspicious. Therefore, when I do not see something on the face of documents, I begin to ask myself why. This year, I took great care to listen to what the Chancellor had to say and to read the little Red Book carefully—in this case not the thoughts of Chairman Mao, but the predictions of the Treasury about what will be spent next 1108 year, and the assets and income that will be received. It stated that the Government would receive about £4 or £5 billion from the sale of public assets—I forget the exact figure.
I thought about the calculations. I worked them all out. I remembered about British Airways and half a dozen other things, all of which the Government will flog off although they belong to you and I, Mr. Deputy Speaker, and to every other taxpayer in this country. Be that as it may, those assets are to be sold off as so much else has been sold off during the past eight years. Somebody referred to those assets as "the family silver". We are now down to the brooms in the broom cupboard. The furniture, the silver, and the tea service have gone, and now we are down to the broom cupboard.
There is no mention of BP in that £4 or £5 billion, which comes from British Airways and others. Suddenly, late last. night, we heard that BP is to go as well. The £4 to £5 billion will depend on share prices. I asked myself, if BP is not. included in the calculations, what will the Government do with those sums, if and when they get them? Will we have the Budget mark II in 1987? Will the same thing happen as happened in 1979 when, with the election out of the way, we had another Budget?
I pose those questions seriously because we have a right to know. I can understand why the sale of BP was not mentioned in those prediction figures until after the closure of the London and New York markets. I can understand the tactics of that because of its effect on the value of the shares on those markets. However, I begin to ask myself what those moneys are for. Could it be that the various suggestions that have been floated by various commentators in the past few weeks are in the Government's mind for the fiscal year ending in 1987? I refer, for example, to altering the start of the 40 per cent. band, to the reduction in the 40 pet cent. level of taxation or even the 60 per cent. level of taxation. Will those things come in the mark II package later this year, when the election is out of the way? The £4 to £5 billion figure referred to in the BP share sale would just manage to pay for those things. However, if they had been in Budget mark I, what my right hon. Friend the Leader of the Opposition said in answer to the Chancellor yesterday about gimmickry and buying votes would have been proved to be true. That funding is there.
It could just be that I am overly suspicious in 1987 because it happens to be an election year. However, we have a right to know. If we are told that the PSBR will be brought down to £4 billion— that will affect interest rates— we have a Budget that plays only with the margins of age allowance, does certain things in respect of VAT and takes only 2p off tax. The Government say that that is because the country is going ahead, more revenues are coming in and there is not a great amount of expenditure. However, we suddenly find that another £5 billion of revenue is anticipated. In those circumstances, one has a right to know the Government's real plans.
As my hon. Friend the Member for Jarrow (Mr. Dixon) said earlier, we are discussing human beings and not power or such matters. In reality, we are discussing human beings and the people, such as those in my constituency, who have not worked for years. We are talking about the roads that need repairing in my constituency, the housing stock that needs refurbishing, the schools that need to be updated and the technological skills that are being lost because of the lack of job opportunities. We are talking about 1109 industries in the north-west which, because of modernisation, mechanisation and industrial progress, are shedding their work forces, and with them skilled manpower, which has nowhere to go. When one considers the country rolling north from Manchester through the areas of the northwest, those are areas of great skill but with industries which were manpower-intensive, and which are now becoming machine-intensive. Therefore, we need investment in those areas.
When considering the Budget, I must ask "What is in it for the north-west?" Taking 2p off tax does not mean much to somebody who is out of work and who has little, if any, prospect of working again because he is 54 or 55 years old. That person may have spent 20, 30, or 40 years in the coal, chemical or glass industries, investing in our nation, but he finds himself rejected and without much hope when he is in his 50s. He, too, has a right to know what the Budget is supposed to do for him. The tragedy is that this Budget does nothing for him in real terms. It does not give him any hope because the minute that we reduce investment in the state, we reduce that man's prospects of work.
As I suggested in my intervention in the speech of the hon. Member for Banbury, through national and federal investment, America has shown us that wealth can be created. The Government have launched a Budget that deliberately cuts investment because it cuts the PSBR figure from £7 billion to £4 billion. At the same time we must ask whether the Budget is fair for all. It is certainly fair and good for some, such as the horse-racing industry and some pensioners, but it is not fair for the millions of people who live in the north in areas where standards of housing and services are declining and where industry needs refurbishment and reinvestment.
When a Government begin to serve only their friends and not the nation, it is time for that Government to go. I suggest to the Treasury team that this will be their last Budget and that soon they will go.
§ Mr. Keith Raffan (Delyn)
Any Conservative Member would find it difficult to follow the logic of the hon. Member for St. Helens, South (Mr. Bermingham). The Budget serves the entire nation, which is why the Opposition parties are so terrified about the response in the opinion polls next week. It is a Budget for the general good, not the Conservative party's good, although that will undoubtedly be a side effect. Obviously, it is bad news for the Opposition because they always interpret good news as bad news.
I need not follow the hon. Gentleman. The Budget is about economic growth and enabling companies to grow, expand and employ more people. It is only by increasing national wealth that we shall have more to spend on the very items that the hon. Gentleman wants us to increase expenditure on. It is illogical in the extreme for him to waffle on in that misleading way.
As a Member of Parliament for a constituency in northeast Wales, in the industrial front line, I am principally concerned about the effect of the Budget on unemployment. I was going to say, as the only Welsh Member present, but in deference to my hon. Friend the Member for Kensington (Sir B. Rhys Williams), I have to say, as the only hon. Member representing a Welsh seat speaking 1110 in the debate, I welcome today's unemployment figures which show that the unemployment rate has fallen faster in the past year in the Principality than in any other area. There has been a fall of nearly 15,000, which is 8.5 per cent. In the past year in my constituency the decrease has been even more dramatic. Unemployment fell by 13 per cent., from 5,805 in February 1986 to 5,075 in February 1987. That reduction is all the more dramatic when one remembers that during that period my constituency had to absorb the major Courtaulds closure at Greenfield with a loss of 530 jobs in the summer of 1985 and 200 jobs in the previous November, not to mention the multiplier effect.
The Government have begun to reverse the industrial decline of the past 20 years in north-east Wales. That is due in great part in Delyn to the enterprise zone approach. It has shown how effective and intensive a localised approach to unemployment can be. Since designation in 1983, 1,555 new jobs have been created. They are not predominantly part-time, female or in the service industries. That will save me from three interventions from the Opposition, who always tell us that new jobs are part-time, female and in the service industries. Eighty eight per cent. of those jobs are full-time, 63 per cent. are full-time male jobs and 86 per cent. are in a wide range of manufacturing activities. The Budget will help to continue the work that has been done by the Government's policies in Delyn, to create more jobs and to continue the downward trend in unemployment in the Principality as a whole.
Before I go on to four particular points about the Budget, I should like to refer to the speech of the hon. Member for Burnley (Mr. Pike). It was surprising to hear a Labour Member call for an extension to his enterprise zone. I am sorry to say this in the presence of the hon. Member for Colne Valley (Mr. Wainwright), but clearly the alliance disease has spread this evening from his Bench back to the Labour Bench. This is yet another split in the Labour party, although we do not need another as we have so many to choose from.
In the past year I have given the Labour Front Bench several opportunities to tell the House whether its position on enterprise zones has changed—as we know, Labour party policy has a habit of mutating. But the Opposition have never said that their policy has changed from that announced by the right hon. Member for Manchester, Gorton (Mr. Kaufman) when he had responsibility for enterprise zones and said that the Labour party would have no more of them. Yet tonight the hon. Member for Burnley called for an extension to his enterprise zone, saying how successful it had been. I recognise, admire and respect a rebel who stands up against his Front Bench, and just as the hon. Gentleman's enterprise zone has been successful, so has the Delyn enterprise zone.
Why do I think that the Budget will help jobs? First, the ½ per cent. drop in interest rates in anticipation of the Budget and the ½ per cent. drop in response to it is what every industrialist and small business man in my constituency wanted most. That more than anything else will help us to create jobs because it reduces costs and increases competitiveness. The Labour party will rue the day if they continue to forget that 75 per cent. of small businesses have an overdraft and know what it is to pay high interest rates, as do those in the farming industry. The fall in interest rates, especially for those in the hard-pressed dairy sector, will be of great assistance.
1111 Secondly, high taxes damage the economy and restrict economic growth. I try to put it simply because, in trying to get the message across to hon. Members opposite, we have no option but to put it simply. High taxes reduce incentives for those in work and for people to take on jobs. High taxes crush enterprise, straitjacket small businesses and stifle job creation. A cut in the basic rate, like raising thresholds, reduces the unemployment trap. That reduction in the basic rate of tax is of particular value to the self-employed and to those whom we are encouraging to set up on their own. I am particularly aware of that, as my constituency was in one of the original pilot schemes for the enterprise allowance.With the rate of inflation remaining low, and with these substantial tax reliefs, modest increases in earnings should ensure that real living standards can continue to rise over the year ahead without unduly increasing our industrial costs. This is the best possible recipe for commercial and industrial success. It is the only recipe for curing unemployment"— [Official Report, 11 April 1978; Vol. 947, c. 1207–8.]Those are not my words, even if they are my sentiments. They are the words of the last Labour Chancellor—certainly the last ever.
How do the Opposition square those words with those of the Leader of the Opposition, who said:The Government choose across-the-board cuts in taxes. We and the British people want across-the-nation cuts in unemployment."— [Official Report, 17 March 1987; Vol. 112, c. 829.]The Leader of the Opposition is economically illiterate. We could forgive that were he not Leader of the Opposition. Moreover, he seems to believe that tax cuts and unemployment cuts are incompatible when in reality tax cuts can, do and will lead to unemployment cuts. His view that tax cuts and unemployment cuts are incompatible was not the view of his right hon. Friend the Member for Leeds, East (Mr. Healey) when he was Chancellor of the Exchequer, and it is not the Government's view either. As my right hon. and learned Friend the Paymaster General said this evening, tax cuts create jobs.
Thirdly, I turn to VAT and the administrative changes that have been proposed. As one newspaper put it succinctly today:Cash flow is the problem that often kills small businesses.One of the greatest concerns of small businesses is the late payment of bills and having to pay VAT on unpaid bills. Optional cash accounting will ease their cash flow problems and provide automatic tax allowance for bad debts.
Fourthly, the Chancellor rightly described training and retraining as vital to a flexible and competitive economy.
I spoke at the beginning of my speech of the problems we are facing in my constituency. They are the problems of success, principally in training. With our success in attracting garment manufacturers to my area, we have developed a shortage of machinists. The Manpower Services Commission has been extremely helpful, but funds are limited. Notwithstanding a major investment in training by Laura Ashley, by Seddons and by Christie Tyler, more people could be taken on if more training was available.
I realise that the retraining measures announced by the Chancellor are a complement to the existing concessions on training for employees to acquire and improve skills in their existing jobs. The proposals made by the Chancellor on Tuesday will ensure that employees about to leave or 1112 who have left their jobs will no longer be taxed on the expenses of a training course. and the employers whom they are leaving will be able to deduct the cost of further training or retraining schemes from their taxable profits.
I welcome this change—I hope the Minister will be able to answer this point when he winds up— hut I wonder how much advantage will be taken of this concession by other than the largest companies. How can we encourage those large companies to do so and to ensure that they have the conscience to do so, especially as they have made many people redundant?
Courtaulds still has a small presence in my constituency at the Deeside mill, which employs 154 people. In 1985, Courtaulds made nearly 800 people redundant in two phases. Would it be possible now for Courtaulds to take. advantage of the Chancellor's concession on behalf of those of the 800 who still remain unemployed? Would it be possible to let those of the 800 people who do not yet have jobs to embark on training schemes for which Courtaulds can have tax concessions?
I would be grateful if the Minister could reply on that point, as tomorrow I have a meeting with the deputy chairman of Courtaulds, Dr. Norman Wooding, to review the help that Courtaulds has given on the Greenfield business park. That would be a point that I and the chief executive of my borough council would wish to put to him.
The Greenfield young enterprise centre is one of too few enterprise centres in my constituency, and is designed to help young people to develop their own ideas practically and effectively and to set up in business. The Greenfield young enterprise centre has been a great success. My right hon. Friend the Prime Minister, when she was in my constituency last Friday afternoon, met several people who had been through the course at that centre and who are now setting up business on their own.
We want to encourage an enterprise culture. Many are receiving an enterprise allowance. Some of them have now moved from their original stall in the Greenfield young enterprise centre into a bigger work space, for which they managed to pay the rent, in the micro-workshops that have been set up in the Greenfield business park. Despite this movement through the young enterprise centre, we still face a shortage of space. I believe more can be done to help young people who wish to set up on their own and who have business ideas. All they need is guidance, financial advice and marketing help, and they can then set up effectively and employ not only themselves but ultimately other people as well.
As the Chancellor and my right hon. Friend the Chief Secretary have said—it was repeated by the Paymaster General today—the Chancellor has achieved a unique treble—an increase in spending, together with cuts in borrowing and taxes. I have to be fair to the Opposition. They too could, given the chance—I know they will not have it, but let us suppose that nightmare came about—achieve a unique treble that was last achieved by President Mitterrand prior to his Thatcherite conversion when he managed almost uniquely to get borrowing, interest rates and inflation soaring through the roof at one and the same time.
The Leader of the Opposition, in his response to the Budget speech, said that it had little to do with the general good. In one respect he is right. It is good for everybody in the country except for the Opposition parties. Only had news is good for them. A review of his speech could well have echoed the review in The Economist of his book 1113 "Making our Way", which was described as "a characteristic blend of vacuity and sentimentality". As a former journalist, it reminded me of the famous editor of "The Londoner's Diary" on The Evening Standard who decided one evening to skip a party that he was meant to attend and write up for the paper the next day. Despite not attending the party, he still wrote it up before it took place, only to discover the next day that it had never actually happened.
The Leader of the Opposition wrote his speech in advance of the Budget. His speech was a response to a Budget that was not delivered. The editor of "The Londoner's Diary" was subsequently fired and the same fate awaits the Leader of the Opposition at the general election.
§ Mr. Max Madden (Bradford, West)
A week ago the west Yorkshire low pay unit issued a press release with the headline: "What hope for west Yorkshire low paid in Tuesday's debate?" Prophetically the low pay unit said a week ago:a 2p cut in the basic rate of tax would cost the Chancellor around £2,600 million. Average earners would be more than £3 a week better off, whilst many low paid workers would benefit by less than £1 a week.Mr. Jonathan Fry of the low pay unit added:a cut in the basic rate of tax is not likely to provide much help to the low paid or our local economy. To the extent that tax cuts have some impact on jobs and the economy, they are more likely to benefit those areas with high average earnings and a strong and developing economic base: the south east of England rather than west Yorkshire.Some time ago I was looking at the list of 50 constituencies with the highest rates of unemployment and 50 constituencies with the lowest rates of unemployment. I was not surprised to see that there was only one Conservative Member of Parliament representing a constituency with a high rate of unemployment and only one Labour Member representing a constituency with a low rate of unemployment.
Ever since 1979 Government policies have been deliberately aimed at ensuring that the southern constituencies of the United Kingdom were given every encouragement and support to ensure a return of a Conservative Government. It is those southern constituencies which this Budget is all about. The Budget has been deliberately designed to buttress those southern constituencies to ensure that every last Conservative vote is wrung out in a desperate bid to ensure that this Government are re-elected.
It is not surprising that there has not been a single Conservative Member representing a constituency in Yorkshire or Humberside in the Chamber throughout the whole of this debate on unemployment, and still less surprising that no Conservative Member of Parliament has sought to catch your eye, Mr. Speaker, to speak in this debate on behalf of their constituents who are unemployed and who are facing great misery, desperation and anxiety over what the future holds for them.
It ill becomes the hon. Member for Delyn (Mr. Raffan), a former Daily Express newspaper journalist, to accuse others of economic illiteracy and to tell us that the problems in his electorate are the problems of success. 1114 Every Opposition speaker represents constituents desperately worried about the economic situation and the extent of unemployment. They have not spoken about the problems of success or economic illiteracy. They have been speaking from the heart.
I pay tribute to my hon. Friend the Member for Jarrow (Mr. Dixon) who spoke as the authentic representative of those millions of people in the northern half of this country who are desperately ill served by this Government and its policies. Those people have nothing to thank this Government or its policies for and they are desperately worried about their futures and their families. My hon. Friend the Member for Jarrow was speaking with the authentic voice of those of us who have the honour to represent those constituencies, which are extremely hard pressed.
Let us remove a few myths. Firstly, we are told by some Government Members that tax cuts and the 2p cut in the standard rate are necessary to give incentives to people to work harder. Why is it that the Government and Conservative Members believe that it is necessary to give people, already well off, a lot more to persuade them to work harder? Many other people who are not well off are supposed to receive even less to persuade them to work harder. I have never understood the logic behind the argument that rich people need more to persuade them to work harder, but poor people should get less to persuade them to work harder. That is the natural philosophy behind the Government's persistence in reducing tax for the well off. Since 1979 they have got the poor to subsidise those tax cuts.
Since 1979 £8 billion has been given in tax cuts, but the poorest six million taxpayers have received only 8 per cent. of that figure while the richest one million taxpayers have shared one third of total tax cuts. The taxpayer on £70,000 has received a tax cut of £367 a week. The low-paid have received under £2 a week and that has been offset by increases in national insurance contributions, VAT, excise duties and other indirect taxes.
What about all this stuff about incentives and the necessity of tax cuts to make people work harder? I am told of a Treasury report— buried long ago— that exposed that myth. It said that tax cuts do not make the rich work harder. In fact, they look at their net pay, see that they are doing reasonably well and, if anything, work less hard than before. Therefore, even in Conservative party logic that is nonsense.
We are also aware that many people have absolutely no choice about whether to work overtime, and therefore tax cuts are no incentive to them. If anything, there should be concern about those living in poverty who are on marginal rates of tax at 90 per cent.—the most vicious tax rate prevailing in this country. If people earn an extra £1 they lose 90p of it. We should be concerned about their tax rates rather than those of people earning £50,000 or £60,000. People should not be kidded into believing that those receiving such salaries are rare animals and pop up only in the Hickey column opening the champagne on Tuesday night to celebrate the money that they were pocketing from this Budget. Oh no! There are 50,000 people in this country earning £70,000 a year.
Let us consider one of the other myths—that there is no money around. There is a myth that there is no alternative to what the Government have been doing since 1979 because there is no money around to do anything 1115 different. The truth is that this country is flooded with money. There are oceans of money and enormous amounts of wealth. Where has it gone?
My hon. Friend the Member for Jarrow urged that we should not talk about millions or billions, but sometimes it is necessary to do so. Some of the money has gone on £8 billion worth of tax cuts, £20 billion to finance 4 million men and women to waste their talents, skills and enthusiasm on the dole queues. Some £600 million has been spent on flogging cheap butter to the Russians, £1 billion on keeping the Common Market food markets in place, £2 million a day on fortress Falklands and hundreds upon hundreds of pounds on Trident nuclear submarines. If this lot are re-elected we will be squandering £10 billion on Trident nuclear submarines.
That is where some of the money has gone. A lot more has gone on sending out lifeboats to banks and propping up all sorts of other ventures. However, in my city tonight there will be 30,000 families going to sleep in houses that need serious renovation. There are 10,000 owner-occupiers on low incomes who desperately await home improvement grants. There are 8,000 families on the housing waiting list.
Today I was told of a group of houses that need £40,000 to renovate them. Once that renovation is complete the market value of the properties will be half that figure. That is the reality in inner city Bradford and other inner cities up and down the country. The cost of construction or renovation is substantially more than the market value of property. That is a reflection of the recession and the mass unemployment that we are witnessing up and down the country, but which is concentrated in the north.
We need £10 million to electrify our railway between Bradford and Leeds. That is another important project that requires public spending and that would create jobs and improve our ability to overcome unemployment. It would expand our local industry and promote tourism. There are many crumbling schools in my area—scores of them are literally falling down. In my constituency half the schools were built when Queen Victoria was on the throne. My children attend schools that are overcrowded, with class sizes well above 30. Teachers are desperately trying to give those kids a decent start in life, but are prevented from doing so because equipment is in short supply. The schools are in a dreadful condition. The opportunity to give those kids a decent start in life is extremely limited.
We hear a lot from the Government about their desire to support high technology. However, cuts imposed in 1981 on the university of Bradford decimated that university. The Government similarly attacked Aston and Salford— both technology universities. Last week, the chancellor of Bradford university announced another 60 redundancies as a result of this year's grant allocation to the university.
In a few days' time the maternity grant will be abolished. That grant was £25. Most Conservative Members despise £25. It would not even meet the price of a decent lunch for most of them. However, for women in Bradford and throughout the country an extra £25 at a time when they are expecting a baby is extremely handy. The amount of money that is available to pregnant women and mothers with children will be considerably reduced as a result of the measures in the Social Security Bill— steamrollered through Parliament in the past 12 months 1116 by the Government. Women will have their financial support reduced, and their maternity rights will also be greatly reduced.
Men and women in my city are aware that, if the Government are elected and the rest of the measures contained in the Social Security Bill are implemented, 10,000 free school meals will be abolished. Many pensioners will lose their housing benefit. Many others will be in desperate conditions because they will lose their incomes. Some 19,000 households in my constituency will lose up to £5 a week as a result: of the Social Security Bill.
That is the reality of what is happening in constituency after constituency north of Watford. However, the Government do not care, they have not cared and they never will care. All they are concerned about is buttressing the comfortable people who live in the comfortable southern constituencies of this country, which have been their electoral target ever since 1979 and which remains their target.
We must remember that when the Chancellor came to the Dispatch Box on Tuesday he faced a number of choices. He had £6 billion in resources to allocate. He deliberately chose to ensure that the available resources were given over to cutting tax in the full knowledge that most of those resources would go to the well-off and that the major benefit would go to those with substantial incomes. He chose to cut public spending.
The Chancellor could have chosen to put available cash into providing work, into new homes, improving older homes, building new schools. renovating old schools, building new hospitals, repairing the collapse of the National Health Service, and doing all the other things that we know are desperately needed, particularly in the north of England. The right hon. Gentleman could have chosen to help the unemployed by providing work. He could have chosen to help the pensioners by substantially increasing their pension. He could have chosen to help the low paid by trying to ensure that child benefit was increased—the most effective way of combating child poverty.
The thing that appalls us most is the waste of money that has been the hallmark of this Conservative Government. There has been a waste of people. Despair and desperation are written all over the faces of most of our constituents. They have given up hoping for better things. They are just enduring the present and are fearful of the future.
Bradford is an extremely disadvantaged and deprived city, yet we have been robbed by this Conservative Government of £70 million in rate support grant in the past seven years. There are 30,000 unemployed in Bradford, 10,000 in my constituency. One in five people is unemployed. Every job is being chased by five or six unemployed people. Half the long-term unemployed— the posh name for those who have been out of work longest— are under 35. That is the reality of my consitituency and my part of the country.
This hard-faced, uncaring and uncompassionate Conservative Government used to talk about real jobs. When the Prime Minister was the Leader of the Opposition in 1979, and before that, I remember that she used to trot up and down the country talking about the Conservatives wanting real jobs. What have we had instead of real jobs? We have seen the unemployment figure fiddled and an expansion of the so-called job training programmes.
1117 Jobs have been created. I have to say to the hon. Member for Delyn that most of the new jobs that have been created are part-time and low-paid. The selfemployed statistics are highly questionable. So we must question the quality of the new jobs that have been created by this Conservative Government. We must say that we are not prepared to settle for more of the same, that we in the Labour party are determined to see the creation of more than 1 million real jobs in two years. In the past few days we have set out in clear detail specific proposals for achieving that return to work by men and women who want to work, and who recognise that work needs to be done. That need is crying out to be met. We shall fulfil that challenge when we are given the opportunity by the electorate.
Monetarism is dead. I am surprised that Conservative Members here tonight are not wearing black ties in memory of monetarism, which is no longer with us. Earlier this week the Chancellor got upset with a radio presenter who remarked on the death of monetarism. In reply he accused him of being a Labour party supporter. I understand that the chairman of the Conservative party became upset recently about remarks that he is supposed to have made to the effect that no one with a social conscience votes Tory. I do not agree with him. Many Conservative supporters and voters are deeply unhappy at the performance of their Government in office. I believe that large numbers of natural Conservative voters are repelled by the effects of Conservative policies on constituencies such as mine and constituencies throughout the north of England.
Those Conservative voters are expressing their concern about the Government's policies. They did not want a cut in the standard rate of tax. What they wanted their Conservative Government to do was genuinely to try to devote available resources to creating work, rebuilding the NHS, repairing the damage done to the education service and improving the quality of life for all our people. That is what Tories with a social conscience wanted. They are bitterly disappointed by the Budget. Those in the southern half of the country will show their dismay at and bitterness about the Budget. My constituents and those of others who represent northern constituencies are in no doubt that the Budget is a Budget of missed opportunities. Above all, it is a Budget that ignores the needs and desperate anxieties of those whom we in the House represent.
§ Mr. Stephen Dorrell (Loughborough)
I am not wearing a black tie, nor am I wearing a solemn countenance, for one good reason. I have listened to every speech by Opposition Members during the debate. None mentioned, welcomed, was pleased about or celebrated the fact that today's fall in seasonal unemployment is the largest ever to have been announced by a British Government. I do not have to wear a black tie for that. It is a long-delayed but welcome step in the right direction. I am proud of it and certainly do not apologise for it.
Nor do I see any reason to apologise for the Government's recent record on public expenditure, which the hon. Member for Bradford, West (Mr. Madden) made much of. He is living in a different world from the one that is formed by the Budget package, which has been brought forward over the past few months by my right hon. Friend 1118 the Chancellor. It is important, in any sensible and intelligent comment on the Budget package, to consider the Budget announced by my right hon. Friend on Tuesday and the public expenditure White Paper published a few weeks ago as a total package. I disagree with the emphasis of my hon. Friend the Member for Banbury (Mr. Baldry) who insisted that the two should be treated separately. On the contrary, they should be treated as two sides of the same coin. They are both part of the Government's economic plans for the financial year beginning this April.
Far from representing a scheme where the Government are cutting back public expenditure to finance tax cuts, when taken together, those plans represent a scheme where the Government are able substantially to increase public expenditure and at the same time to introduce tax cuts. It is instructive to look at the balance between those two different ways of using the resources that the Chancellor felt were at his disposal.
Let us look at the effect of the decisions that will be implemented at the beginning of the next financial year. The Government's spending programme foresees an increase in Government spending of £4.5 billion and tax cuts of £2.5 billion. In round figures, of the room for Manoeuvre that the Chancellor felt that he had, he has used two thirds to increase public spending and only one third to reduce taxes. It is a grotesque distortion to represent that total package as one where we are cutting spending to finance tax cuts.
Our opponents say that most people are willing to forgo some tax cuts in order to see proper public services. I agree with that. My right hon. Friend the Chancellor obviously agrees with that because it is precisely the policy that he has pursued. It is not the same as saying that the public are not interested in any form of tax cuts.
When considering the balance of the package that my right hon. Friend the Chancellor has introduced for the next financial year, it is clear that he has weighted it two thirds to one third in favour of public spending increases. It is also instructive to look behind the total figures. There is £2.2 billion additional public expenditure for the Department of Education and Science alone. In other words, the total cost of the 2p reduction in income tax exactly matches the total increase in public spending on education. To suggest that the two factors are out of balance seems, as I have said, to be a grotesque distortion.
I very much welcome the fact that my right hon. Friend the Chancellor, as a result of a growing economy and of the fact that our economic recovery is now well under way, has been able to introduce public spending increases of £2.2 billion in the education service, £2.2 billion for the budget of the Department of Health and Social Security and £500 million for job creation in the Department of Employment. I do not see any reason to apologise for those figures.
One Opposition Member said earlier that he could not see where the benefits would come in his constituency. It is very clear. There is a 25 per cent. increase over 18 months in teachers's pay and there has been a 20 per cent. increase in real terms in spending on the National Health Services since 1979. Those are the results of a public spending commitment by the Government, which some of us have been pushing on the Government for several years. Now that that is taking shape, I am pleased to welcome it.
1119 In an intervention earlier in the speech of the hon. Member for Kingston upon Hull, East (Mr. Prescott), 1 sought to highlight the difference between the public spending plans introduced by my right hon. Friend the Chancellor and those espoused by the Opposition. We are not seeking to create artificial jobs by, as one Labour spokesman suggested, regarding local authorities as a job creating machine. We are trying to improve the level of services available to people who want to use services such as the Health Service, the education service and other services that the vast majority of people look primarily to the state to provide. We are trying to provide a better targeted, better managed and growing level of service from the public sector. I warmly welcome that as one of the elements of my right hon. Friend's Budget strategy.
My right hon. Friend the Chancellor was correct to see the public sector borrowing requirement fall from the plan that he originally had for the next financial year. There are two reasons for that. The immediate reason is that the announcement of the fall has allowed interest rates to begin to fall and we can hope that they will continue to fall. That has an important effect on businesses and job creation and an important effect on mortgages and therefore on home ownership.
My right hon. Friend the Chancellor is right to see the PSBR at a lower level for another reason, which should appeal to the Opposition. The Opposition, like me, say that they believe in the principles of demand management. In that case, I believe, as the Opposition claim to believe, that public borrowing should be allowed to rise during a recession. However, the corollary to that must be that in a recovery the PSBR is allowed to fall. I have no dogmatic objection to public borrowing as such. However, I have a clear objection to excessive borrowing.
At the moment, private borrowing is buoyant. That is precisely the time when it is right, under any form of demand management approach to the economy, for the Chancellor to be reining back on his own borrowing requirement. In demand management the total level of credit creation in the economy is important. When the private sector has a high demand for credit leading to high credit creation towards the private sector, that is the moment when the public sector should be reining back its demand for credit to ensure that we have a balanced economy that does not run into the dangers of overheating of which Opposition Front Bench spokesmen repeatedly talk. The policies espoused by the Opposition would cause such dangerous overheating.
My right hon. Friend the Chancellor is right to see public borrowing fall at this stage of the economic cycle. If he had allowed the borrowing requirement to rise to a much higher level, there would have been a significant danger of overheating. I enthusiastically endorse my right hon. Friend's approach on that subject.
I want to raise another point which does not arise directly from the Budget, but which concerns taxation policy in the medium and longer term. I hope that my right hon. Friend the Chancellor will be working on this point now in anticipation of a third term in office during which he can put the results of his deliberations into practice.
My hon. Friend the Member for Eastbourne (Mr. Gow) and my hon. Friend the Member for Reigate (Mr. Gardiner) referred to the importance of the marginal rate of tax on incentives and they both concentrated on the standard rate. I believe that they understated their case when they considered the effect of a 30 per cent. or a 35 1120 per cent. standard rate of tax on incentives and that they missed the important solution to the real problem of inadequate incentives that exists in the income band in the country of between £80 and £200 a week. In that income band, the effective marginal rate of tax is not 27 per cent., 29 per cent. or 30 per cent. It is the standard rate of tax plus the national insurance contribution, plus the housing benefit taper, plus, very probably, the rate of withdrawal from family income supplement and the withdrawal of other means tested benefits. In many families in that income band, the effective marginal rate of tax can be around 90 per cent. In the next Parliament, the key taxation strategy that I want a Conservative Chancellor to adopt as a high priority is that marginal rate of tax and benefit loss on low income households should be brought into line with the maximum rate of marginal rate of tax that we are prepared to tolerate for other income groups.
After all, if we believe that 60 per cent. is too high—as some of my hon. Friends claim— for high rate taxpayers, surely 90 per cent. is too high for low income households. There should be a clear priority from a Conservative Chancellor in the next Parliament to reduce the marginal rate of tax and benefit loss that applies to low income households.
The history of this Government since 1979 shows that there have been some very welcome reductions in taxation, for example, the national insurance surcharge, action to increase thresholds by more than inflation and action to reduce the standard rate. However, I hope that in the next Parliament my right hon. Friend the Chancellor will concentrate his strategy on a particular group of people among whom the problems of high marginal rates are still very intense and a major disincentive to go to work or do an extra hour's overtime at work and which he has it in his capacity to improve.
Finally, as the hon. Member for Loughborough, it would be entirely wrong for me to let the Budget pass without welcoming the fact that the Governor of the Bank of England chose my constituency to make the speech described today as the funeral oration for sterling M3. From my humble position on the Back Benches, I have been encouraging that approach since 1979. It always causes me a certain wry amusement when my right hon. Friend the Chancellor refers to the governor's Loughborough lecture, but I am very glad that that lecture has been included in the text of the Budget, laying to rest an unfortunate aberration in monetary policy. I shall not develop the argument at length but, like the Governor of the Bank of England, and perhaps even my right hon. Friend the Chancellor, I hope that, having buried a monetary meter which was always inaccurate and never gave us the information that we needed, there will be a clearer statement in the next Parliament of an alternative approach to monetary policy which in my view should be based on membership of the European monetary system.
The general tone of the Budget is very welcome, however, and I especially welcome the fact that I am able to make this speech in support of it on the day on which unemployment fell by the largest monthly figure since records began.
§ Mr. Allen McKay (Barnsley, West and Penistone)
I shall be brief. The hon. Member for Loughborough (Mr. Dorrell) is wrong about unemployment. We acknowledge that there has been a fall in unemployment and we 1121 welcome it as a step in the right direction, but what type of fall has it been? What type of jobs have been created? Even more important, where are those jobs? They are certainly not in my constituency, although my constituents are greatly affected by unemployment. In 1982 unemployment was 2.73 million, in 1985 it was 3.05 million, in June 1986 it was 3.11 million and in January 1987 it was 3.16 million, so there has certainly been no fall in unemployment, and no jobs have been created in Yorkshire and Humberside. In south Yorkshire, unemployment is still 18.8 per cent. In my constituency of Barnsley it is 20.5 per cent.—one person in five—and the male unemployment rate is about 22 per cent. So when the Government say that employment has been created, I can only ask where, when and how, because it has certainly not been in my area. The number of people unemployed for more than 12 months in Yorkshire and Humberside is 132,791— an increase of 2.27 per cent. over the 1986 figure. I applaud any decrease in unemployment, but I have to ask where, when and how it has taken place.
This is a cynical Budget. The Government are pandering—unsuccessfully I hope—to people's tendency to say, "I'm all right Jack" and blow the 4 million unemployed, the low paid, the sick, the needy and the old. That is a deliberate ploy for the next election, whenever it comes. According to the Red Book figures, the Government have hedged their bets by keeping back the amount of money still available from the sale of this country's assets. It is a blatantly cynical Budget for an election period, but people are far better informed nowadays than they used to be and they will recognise the Budget for what it is. Those in work have children who are unemployed and parents who are pensioners, so they will take note of those factors and the Government's ploy will come unstuck.
When I saw a newspaper headline proclaiming that the Budget meant £7 in the pocket of the average worker, that looked pretty good until I discovered that the average worker in question earned £17,000 per year and lived in a £30,000 house. There will be no dancing in the streets of my constituency on that basis because those are certainly not average wages and house prices for the people whom I represent.
Many people will applaud the Government's proposals with regard to on-course betting, but clawing back the lost tax from gaming machines is a move in the wrong direction because it will take £250 from every working men's club in my area when they depend on income of that kind to keep going. If the Government had targeted amusement arcades, which should never have been allowed to grow up in the first place, I could have applauded that as it would be taking a hard look and making a real cut in teenage gambling. I do not know whether Conservative Members are aware of the Yorkshire Post campaign, but the Chancellor has missed a great opportunity to do something about this.
I hope that the Government will give serious attention to the mining industry. Over the past few years 70,000 jobs have been lost following the closure of a number of collieries, and there are more to close. The average age of those made redundant has become much lower and the operation of the redundancy scheme means that the enhanced payments have become much lower. The training period offered to redundant mineworkers is six 1122 weeks, which is too ridiculous for words. It should be based on that which prevails in the steel industry, which is two years.
In Yorkshire and Humberside we have the men, the women, the will, the way and everything else that it takes to recreate industrial activity in the area. Unfortunately, we do not have Government help and direction. In particular, the area which I represent needs to become a development area.
§ 9.5 pm
§ Mr. Tony Blair (Sedgefield)
The Budget was proposed in the context of a two-nation Britain. Its real significance is that it represents a decision to try to build an electoral majority in one half of the division instead of an attempt to heal the divisions. As with all previous Budgets since 1979, it is designed for the comfortable Britain.
My hon. Friend the Member for Jarrow (Mr. Dixon) has said that he feels that he is living on a different planet from the one that is inhabited by Ministers. He was right to say that, for there are two different planets or worlds. The Government address themselves to the part of Britain that can afford to pay its way and has the services that it wants while Opposition Members address themselves to those who lack the essentials of life, the standard of living that they should have and the benefits that the other Britain enjoys.
The division in Britain shows itself in the smaller measures as well as the larger ones. For example, the personal equity plan was introduced in last year's Budget, and some of my hon. Friends will remember how. The Chancellor of the Exchequer said:Although the scheme will be open to everyone, it is specially designed to encourage smaller savers, and particularly those who may never previously have invested in equities in their lives."— [Official Report, 18 March 1986; Vol. 94, c. 178.]In other words, the PEP was for the small investor or first-time investor. That was the pledge and that was the headline that appeared in the newspapers.
I have undertaken some research on PEPs to ascertain who has benefited from them. My survey has encompassed some of the larger plans, such as those run by Barclays Bank and the Midland Bank, Save and Prosper and Hill Samuel. It appears that about 75 per cent. to 90 per cent. of those in PEPs have stocks and shares already and that the average investment is £2,000, which is almost the limit of £2,400. More details are available about the Barclays scheme than the others. The Chancellor of the Exchequer has spoken of it and it should be the most populist in terms of people's capitalism. However, the majority of those with Barclays PEPs have been lump-sum investors, and 80 per cent. of them have invested the full £2,400. Overall, 40 per cent. of those using the plans are either higher rate taxpayers or those paying capital gains tax in substantial amounts already. This means that the benefits to be gained from PEPs have been enjoyed mainly, as the Opposition warned last year, by those who already have capital gains tax commitments. In other words, it has been used principally as a tax-free shelter to those who are already better off. I make that point not to criticise personal equity plans but to show the priority that divides the two sides of the House.
My hon. Friend the Member for Jarrow spoke about the difficulty facing one of his constituents who had had the prescriptions he used to use withdrawn because the 1123 drug was not on the Government drugs list. We had an announcement a couple of weeks ago that some £10 million was to be raised by increasing prescription charges. I estimate that on the personal equity plan tax shelters, those people already paying capital gains tax—in other words, those using PEP simply as a straight means of avoiding capital gains tax commitments—will benefit in this tax year by about £15 million to £20 million. That would be enough to pay for the sort of thing my hon. Friend the Member for Jarrow was talking about.
There are differences not just in small measures but in the broader scope as well. When the Financial Secretary spoke yesterday he mentioned the wider share ownership survey that has been prepared by the stock exchange and the Treasury. I do not want to go into detail about that today. But let us assume in the Government's favour that 20 per cent. of the adult population has benefited from the privatisation measures.
That still leaves 80 per cent. of the population that is losing unfairly in two ways. First, they are losing in a way that reduces the money coming into the Exchequer, therefore, reducing the benefit that they could receive. They lose because there has been a policy—it must be a deliberate policy—of under-valuing the assets sold off in privatisation. The figures are too stark. On British Airways. British Gas and British Telecom alone the undervaluation on the first day of trading amounts to over £2,000 million. I am aware that when share issues come on the market there will always be a premium. People will always want a small premium in order to make the share issue go with a buzz. That is understandable. The average share issue premium for 1986 on major share issues was 7 per cent. On privatisation issues, the average premium on the first day of trading has been 77 per cent. I could understand the Government being wrong by a few per cent. but I cannot understand them being wrong by a factor of 11.
In that under-valuation, let no one think that the benefit has gone even to the 20 per cent. of the population; it has not. Some £350 million first-day profit was made by foreign institutions such as Japanese and American banks and so on. Indeed, it is interesting that when Japan privatised its telecommunications network a couple of weeks ago it did not allow any foreign participation. Yet we allow a windfall profit of hundreds of millions of pounds to be made by foreign speculators.
We lose in a different way. My hon. Friend the Member for Burnley (Mr. Pike) is absolutely right. There is a feeling, particularly on Government Benches— I dare say it has percolated through to the general population—that there are only winners in privatisation and no losers. They feel that it is a bonanza where everyone wins. But, when we privatise one of the assets such as gas, telecommunications or British Airways, we lose the income from that asset. The figures for the income we have lost from those assets, based on net dividend payments for the coming financial year— that is the fair basis on which to do it—are, for British Airways £43 million, for British Telecom £256 million and for British Gas £262 million. The total is over £560 million. We have lost that income and that is why we say that when the Government treat the sale of assets—as they do—as a deduction from running costs in Government accounts—as part of their revenue—that is not merely wrong in accounting terms; it is criminally irresponsible in terms of safeguarding the nation's assets.
§ Mr. Gow
Does the hon. Gentleman not agree that when the last Labour Government sold shares in BP they treated the receipts from the sale of those shares in a way identical to the way in which my right hon. Friend the Chancellor is treating receipts from sales of public assets?
§ Mr. Blair
The total of the BP share sale was a few hundred million pounds. The Select Committee on the Treasury and Civil Service dealt with the specific point that the hon. Member for Eastbourne (Mr. Gow) rightly raises. The Committee said that that was fair enough if one was talking about a one-off programme or a few hundred million pounds. That must be right. But with this Government we are talking about privatisation that runs into tens of billions of pounds.. and it cannot he right to treat the proceeds from capital assets simply as a deduction against running costs. That income could be used to pay for better pensions, better child benefit, a better National Health Service and better education. The income from the sale of those assets has been lost. It is a matter of choice.
§ Mr. Pike
The point that one must emphasise and that my hon. Friend is making, although I do not think that Conservative Members accept it, is that we do not lose that income for just one year but lose increasing amounts year after year.
§ Mr. Blair
My hon. Friend is right. That is why in the long term the sale of assets is such an incompetent way of raising money. In the course of the Budget debate the Government told us that there will be no new schemes or new programmes to assist the unemployed. The Chancellor says that the best hope for the unemployed is the Government's record on the economy. It is time that we looked at that record. In the past few days several bumper myths have been put about by the Chancellor and by Treasury Ministers about the British economy. The first is that we have some sort of glorious growth rate in the economy that is a marvel and the envy of the Western world.
In the 1986 edition of a set of statistics called the "United Kingdom National Accounts", a comparison is made between the growth rates of Britain at various times in the past few decades. In the 1950s the average growth rate was over 2 per cent., in the 1960s it was over 3 per cent., in the 1970s it was over 2 per cent., and in the 1980s it is less than 1.5 per cent. If one looks at the comparative growth figures for Britain and other European Community countries over the entire period of the Government's term of office, one sees that we have one of the worst growth rate records of any major industrial country.
One of the boasts that we heard from the Prime Minister the other day is that we have record exports every year. I was curious about that statistic and asked the Library staff to do some research. Since 1949 there have been only seven occasions when exports have not been at record volumes year on year. Five of those have been under a Tory Government, one was in the year when the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) became Chancellor of the Exchequer in a Labour Government and the last occasion on which it occurred was under the last Labour Government. The average growth in exports under the last Labour Government was about 5 per cent. The average growth in exports under this Government has been only 3 per cent.
1125 The notion that we are living through some great export boom is farcical, and that is evident when the figures are examined. The important change in Britain over the past few years has not been the level of exports but the level of imports of manufactured goods. We are told by the Prime Minister that we need not worry about what has happened to traditional British manufacturing industry because the new technology industries will come on and provide growth and new hope and give manufacturing impetus to the economy. However, the deficit in manufactured trade is not just on the old traditional industries but on the new technologies too. Not merely have the Government failed to save our traditional industries; they have failed in the creation of new ones. At the present time manufacturing output is still below 1979 levels.
The only crumb of comfort that the Government can take from that picture is their allegation that manufacturing productivity has increased substantially. There may be many reasons why that has happened, but the most significant factor has been the shedding of manufacturing jobs. Also it is right to ascribe the most recent surge in manufacturing activity to the cyclical turn in output as employment lags behind the upturn in manufacturing trade—an upturn brought about by the lowering of the exchange rate, which the Government resisted.
A much better guide to the health of manufacturing is manufacturing output, because the total output determines whether Britain can pay its way. When we compare ourselves with other EC countries in that respect, we see that none has done worse than Britain. From 1979 to 1986, we have been at the bottom of the table. That is the measure of what has happened. When the Opposition argue about manufacturing industry it is not simply in the context of the loss of manufacturing employment; it is in the context of manufacturing as a wealth-generating base to the economy. Unless we build that wealth-generating base, discussion about the level of services or spending on services will be otiose, because we shall not have earned enough money to spend.
The Government say that, because of their prudent financial policies and especially because of the cut in borrowing, they can reduce interest rates. The right hon. Member for Brentford and Isleworth (Sir B. Hayhoe) and the hon. Member for Loughborough (Mr. Dorrell) said an eloquent elegy over the deathbed of monetarism earlier tonight, but it is as well to remember that monetarism was supposed to reduce interest rates. When the hon. Member for Eastbourne took a trip down monetarist memory lane, he tried to tell us that the Government were running into trouble on the money supply and that interest rates might have to be increased.
§ Mr. Leighton
He is a recidivist.
§ Mr. Blair
He should go for a long period of rehabilitation.
Even with the reduction during the past couple of weeks— we had to prod the Government into that—interest rates are still the highest of any of our major industrial competitors. Why do we have such high interest rates? Why are we starting to reduce them from that high level? Is it the case, as the Government have tried to say, that public expenditure is too high? From the Red Book, we discover that that is not the case. Indeed, the Government's reason for interest rates being high has 1126 nothing to do with public spending or public borrowing. As the hon. Member for Loughborough confirmed, the Government's reason is this:Private sector borrowing has been rising and is now over 10 per cent. of GDP. It has clearly contributed more than public borrowing to upward pressure on real interest rates.The culprit is not public borrowing, but private borrowing.
The significance of that fact is that we are living through a boom in consumer expenditure which is dangerously out of control. Indeed, one need not be a monetarist to ascribe importance to the fact that the £2.9 billion increase in bank lending demonstrates the amount of consumer debt that is growing in the British economy.
§ Mr. Dorrell
Is the hon. Gentleman therefore advocating an increase in interest rates to choke off that increase in consumer credit?
§ Mr. Blair
No. The hon. Gentleman said that if there are high levels of personal debt and high personal borrowing, the Chancellor was right to cut Government borrowing to compensate. However, we have such high personal levels of borrowing because the Government have encouraged that level of personal consumption and debt. The worst thing that one could possibly do in such circumstances is to cut income tax, as that will fuel the consumer boom further. The real case against income tax cuts as the best economic policy for the macro-economy is not simply on the grounds that a reduction in unemployment would come better with increased public expenditure, a point made by many of my hon. Friends, but that all that income tax cuts do is fuel the consumer boom and put even greater strains on private borrowing. As the hon. Member for Loughborough said, that is the reason why the Chancellor felt that he had to cut public borrowing.
§ Mr. Dorrell
I am sorry to persist with the point, but the hon. Gentleman has expressed concern about the rate of consumer borrowing. He has rejected an increase in interest rates as the way to choke it off. How else does he propose to do it?
§ Mr. Blair
By ensuring that any room for manoeuvre that the Chancellor has is directed to planned public investment, not to a consumer boom through income tax cuts, which will simply make borrowing worse. As my hon. Friend the Member for Bradford, West (Mr. Madden) said, tax cuts will go on imported consumer goods. Hon. Members do not need to take my word for that. It is thought by others as well. Before the Budget, a pamphlet was prepared by a body called the Tory Reform Group, of which some of my hon. Friends may have heard. It says:A cut in the real burden of income tax will result in significant extra personal expenditure on foreign goods. This will create new jobs for our competitors and widen the current account trade deficit in 1987, which will already be causing political damage. This is not the year to boost consumer spending.The patrons of this Tory Reform Group include not merely several senior Conservative Members of Parliament but several Cabinet Ministers, including the Paymaster General. I agree with what he and his right hon. and hon. Friends say. The difficulty is that he seems somewhat schizophrenic. Part of him is a member of the Tory Reform Group and the other part is a Cabinet Minister. The worst thing that we can have is income tax cuts, which will fuel the consumer boom even more.
1127 The recent interest rate cut may not be as long lived as industry, home owners and my hon. Friends will hope for. The Red Book gives a clue to the real state of the British economy as opposed to the state set out in the Chancellor's Budget. If one calculates back from the housing retail price index the Government's projections of what the interest rates will he in a year, one sees that at the very most the Government are planning for a 0.5 per cent. reduction. One should treat with a great deal of caution not merely whether the income tax cuts will last but whether the fall in interest rates will last.
The case made by my hon. Friends is clear. It is that income tax cuts are the worst thing that can be done for the economy and the least effective way to provide jobs. The Treasury model has been decried by the Paymaster General recently, but every round of the Treasury model shows that planned public expenditure is a much more effective way to produce jobs than cuts in income tax. The Paymaster General may decry models, but the figures in the Red Book, which cover practically every aspect of the economy, are done on the basis of Treasury models.
It is not simply Treasury models that tell us that income tax cuts are the least effective way of creating jobs. Common sense tells us that as well. Durham county council put forward a programme a few months ago on harnessing unemployed people in its area to the needs that required to be met in that area. It showed that, if one used unemployed people, long term and otherwise, and related the unemployed resources to the needs, money was saved in the long run because there was no need to pay unemployment benefit and again there was a benefit on taxes.
Hon. Members on the Government Benches say that our job creation programme is simply about providing jobs, not meeting needs. That is not so. We started in that programme from the point of view that every single job had to meet a specific need. There are literally millions of jobs to be done in the British economy. The Government's task is to put the two together, people's needs and the resources available in the form of unemployed people.
Two factors underlie the Government's judgment in this Budget. The first is a cynical belief that people will prefer cash in their hands to better public services—better education, better health, better training. In other words, the Government believe that the short-termism that afflict them afflicts also the British people. We dispute that. We also dispute the second premise of the Budget, that the divisions to which the Government are indifferent can be tolerated for another few years. These divisions are set up everywhere by the Government: between home owners and council house tenants, between those in BUPA and those who use the National Health Service, between share owners and those who have none, between the employed and the unemployed, between the comfortably off and the poor. It is a Budget about division that addresses itself simply to that one part of divided Britain.
No one can claim that the priorities of this Budget are about the lower, worse-off half of Britain. When it is described as a prudent Budget, prudent for whom? Prudence is a game that is played by the comfortable part of Britain while the other half stands outside with noses pressed against the window. The Government's tactical consideration is that there are enough on the inside to vote down those on the outside.
1128 This was a Budget for a divided kingdom. It will be the duty of the Labour party on coming to office to reunite our kingdom.
§ The Minister of State, Treasury (Mr. Peter Brooke)
One thing on which the hon. Member for Sedgefield (Mr. Blair) and I are agreed is that the closing speeches on the Thursday night of the Budget debate are one of the high points of the parliamentary year. It has been a vigorous debate and it is perfectly clear that at no stage did anyone have to be brought in from the highways and byways to speak. It is a pleasure to be debating opposite the hon. Gentleman, although I know that he will forgive me if I say that his pre-Budget headline of "The Bribes of March" was ill-advised on two counts. First, in the light of my right hon. Friend's eminently cautious Budget, it was a poor piece of forecasting and, secondly, at this moment in the history of the Labour party it seemed curious for a Member of the Labour Front Bench to draw attention, even indirectly, to the opening speeches of "Julius Caesar" and those memorable lines:The fault, dear Brutus, is not in our stars, But in ourselves, that we are underlings.The hon. Member was, however, in good company on the issue of forecasting in that his right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) yesterday quoted the Labour party's favourite stockbrokers, Phillips and Drew, as judging that themarkets are holding their breath for an early election and expects an immediate reversal of policy afterwards".—[Official Report, 18 March 1987; Vol. 112, c. 954.]What Mr. Bill Martin, the chief economist of Phillips and Drew, actually said yesterday in the aftermath of the Budget was:Our earlier fears that policies would have to be thrown sharply into reverse post-election to cool the economy down have duly subsided. When tighter policies do start postelection they will be more akin to a touch on the brakes than a throwing out of the anchor.That sober judgment is a broadside below the water line for the bizarre and unconvincing thesis that the leadership of the Opposition have been peddling—that the Budget is part of a "cut and run" strategy.
It is all of a piece with their soubriquet of my right hon Friend the Chancellor as "lucky Lawson". Ever since Napoleon made luck one of the criteria for being a marshal the world has regarded luck as a blessing rather than a disadvantage. In any case it is only appropriate in the case of my right hon. Friend under one definition. My right hon. Friend's Budget is a culmination of years of sensible policy. The only ground for calling him lucky is under that definition of luck that says it occurs when planning meets opportunity.
I have been genuinely lucky under a wider definition. All of us bring to the House the impedimenta of our past careers. For my part, the 18 years before I joined the Government were spent entirely as an employer in a small business in the private sector, with all the rewards and tribulations that are involved in sustaining employment, in good times and in bad— but above all with a profound familiarity with the statutory paperwork with which small business men have to cope. I therefore count myself peculiarly fortunate, as my right hon. Friend the Member for Brentford and Isleworth (Sir B. Hayhoe) said, to have been the Minister responsible to Parliament for 1129 Customs and Excise at a time when my right hon. Friend felt able to announce such far-reaching reforms of VAT in the interests of small business.
Over a score of hon. Members on both sides of the House have welcomed my right hon. Friend's announcement about VAT and cash accounting even if the right hon. Member for Sparkbrook was wholly mistaken yesterday in thinking that the Opposition were its progenitors in last year's Finance Bill. Of course, in addition my right hon. Friend announced an optional scheme of annual accounting for those businesses with a turnover of up to £250,000 so that they will need to make only one VAT return in a year instead of the four required at present. This will reduce the form-filling burden.
The Government have increased the VAT registration threshold to the limit allowed under Community law. There is much pressure to increase it further, but it is only fair to point out that there was strong opposition to our earlier proposal, which we have dropped, to require businesses with a turnover below the threshold— of which there are 250,000—to deregister. Our collection system is cost-effective: £600 million of net VAT yield is collected from small businesses with a turnover of under £50,000 and the cost of collecting all VAT— the whole £23 billion—is only £200 million.
I am pleased to announce a further package of measures on Inland Revenue matters to help small firms and the self-employed. The aim is to offer further advice and guidance on topics where small firms say they most need it. There are three main areas. First, there will be help with decisions on employment status such as whether a person is employed or self-employed for tax and national insurance contriubution purposes. Secondly, there will be help for employers in the operation of PAYE and national insurance contributions. Thirdly, there will be help and guidance about the Inland Revenue's investigations of small traders' business accounts. There are further details in an Inland Revenue press notice which is being issued today.
Any steps that we can take to ease administrative burdens on business are important and worthwhile. This practical package of help and advice deserves a warm welcome from small firms and the self-employed. Entrepreneurial small businesses are very important for job creation. Tax reductions increase incentives and demand from the local economy. So much for the charge that this Budget has nothing to do with the unemployed.
My right hon. Friend the Chief Secretary gave a trailer yesterday that I would expand tonight on profit-related pay, a subject eminently suited to today's debate. The key to continued strengthening of economic performance is increased adaptability and flexibility. Performance has been damaged for too long by trends towards increased rigidities throughout the system. Business cannot survive in that atmosphere. Whether we like it or not, the world is rapidly changing. If United Kingdom businesses are to prosper we must be able to respond quickly.
Major steps have already been taken, including deregulation. But major rigidities in the labour market, and in particular in pay determination, still exist. The pay of most employees is still little influenced by how well businesses are performing. This often means that the only way firms can adjust to difficult trading conditions is by redundancies, and the work force has no direct personal 1130 incentive to help generate, and then share in the results of, improved performance. Many of our more successful businesses have already realised the need to break out of that trap.
The right way forward is unlikely to be identical for all. There is an existing and continuing role for employee share schemes, but profit-related pay has a major part to play because it means that the work force automatically has a direct interest in helping businesses succeed. A measure of flexibility in total wages means that employees share the rewards of successful performance and receive some protection from the threat to continued employment when conditions are difficult. It will improve motivation, incentives and long-term rewards for all.
The proposal follows on from the Green Paper. The great majority of responses favoured such a move. All private sector employees, other than controlling directors, will be eligible for this new relief once they are included in a registered PRP scheme.
The essential requirements that schemes must satisfy to qualify for tax relief boil down to three points. First, there must be a clear relationship between PRP and profits. Secondly, the schemes must last for at least a year. Thirdly, PRP must be a minimum proportion of total pay, at least 5 per cent. if the prospect is that profits are unchanged.
Like any new proposal, it is bound to look complicated at first sight, but it is designed to operate as simply as possible. In some respects, details have been simplified since the Green Paper—for example, the registration requirement. As long as the basic requirements are met, there will be great flexibility in designing schemes to meet the needs of individual businesses. It can operate at company or sub-unit level and relate PRP to a share of profits or to year-on-year changes in profits. There is flexibility on the frequency of PRP payments, and freedom over the treatment of joiners and leavers.
Before PRP can be paid, schemes must be registered. Therefore, I urge early planning of schemes. A press release on key features is available now, and in a few weeks employers will be invited to place themselves on the Revenue mailing list for detailed guidance notes following the Finance Bill receiving Royal Assent. I encourage employers to act now to get the benefits as early as possible.
PRP schemes offer major advantages to employers, employees and to the economy at large, even without tax relief. The proposal to introduce this relief, for which there is no time limit, reflects the Government's wish to promote urgently needed flexibility. This is underlined by the fact that the relief which is now proposed—half of profit-related pay within specified limits—is double the rate envisaged in the Green Paper.
Even if PRP is only 5 per cent. the relief for a married man on average earnings is equivalent to 1p off the basic rate of income tax. If PRP is at 20 per cent., then, as the Chief Secretary said yesterday, the maximum amount eligible for relief will be equivalent to 4p off the basic rate.
I urge employers and employees to seize this opportunity to make a major contribution to the longterm strength and adaptability of their businesses and the economy at large.
Profit-related pay was one subject of which last year's Budget was a harbinger. Another scheme which comes to fruition this year, after being launched last year, is payroll giving. As the Minister responsible for pay in the Civil Service, I want to say a brief word about payroll giving in 1131 the Civil Service. In his 1986 Budget, my right hon. Friend the Chancellor announced a new scheme for tax relief for payroll giving to charities. It enables employers to contract with a registered payroll-giving agency which will distribute employees' donations to the charities of their choice. Employees then receive tax relief on donations, up to a total of £120 a year.
Like many others, civil servants are keen to participate in this scheme, which benefits charities and the people who give to them. In December, my right hon. Friend announced that the Government, as employer, would participate. We are moving quickly to set up a scheme for the 216,000 people who are paid through the largest Civil Service payroll system, which is centred in Chessington.
On 11 March, the Inland Revenue published the names of the payroll agencies that are already registered. Within days the Treasury had written to all the organisations in England and Wales registered as payroll agencies, and to one other that has announced its intention to seek registration, asking whether they would be interested in tendering for the scheme that we plan to set up this summer. We look forward to their responses.
I shall turn now to the questions that I have been asked during the debate. One that was raised by the hon. Members for Kingston upon Hull. East (Mr. Prescott), for Colne Valley (Mr. Wainwright), and for St. Helens, South (Mr. Bermingham) related to British Petroleum. I am happy to clarify that matter. As my right hon. Friend the Financial Secretary announced in the House yesterday, the Government will sell their remaining holding of shares in BP, subject to market conditions, during the 1987–88 financial year. The proceeds will be paid in instalments, of which only the first will be due in 1987–88. The sale will be a further major contribution to our policy of encouraging wider share ownership and reducing Government involvement in the private sector.
I was asked about the Budget arithmetic. The Government announced their estimate of £5 billion a year from privatisation proceeds from 1987–88 onwards in the November autumn statement, and again in the January public expenditure White Paper. As the Red Book makes clear, the same figure was taken into account in the Budget in setting the PSBR for 1987–88 and in indicating the PSBR path for later years. The sale of BP shares will not add to this £5 billion a year estimate, but will help contribute to it. It has nothing to do with the future scope for tax cuts.
§ Mr. Blair
Can the Minister explain why the moment the Government announced the sale of their holding in BP the share price decreased sharply? Is not a reason the fact that it is appreciated that to sell the holding at one go, and partly paid, is a much less competent way of selling it than selling it in tranches, if it is to be sold?
§ Mr. Brooke
The behaviour and reaction of the market will be analysed, but, obviously, it does not relate to the specific announcement that I have just made.
My right hon. Friend the Member for Brentford and Isleworth spoke about the low paid. I know that he moved from the Treasury to the DHSS and he will recall that the new social security system which will operate from April 1988 is based on net income. This will mean that rate cuts and allowance increases will in future have similar effects on people in the poverty and unemployment traps. He asked about public expenditure, but, as he knows, that 1132 comes at a different moment in the rhythm of the year. In response to his comments on pensions. the average annual rate of growth of income for pensioners has been significantly higher under the Government since 1979 than it was between 1974 and 1979. It is higher even on retirement pension plus income-related benefits. It is much higher on occupational pensions. What increases it in particular is the fact that there was a negative return to pensioners from investment income in the 1970s because of the disastrous effect of inflation.
My right hon. Friend and my hon. Friend the Member for Eastbourne (Mr. Gow) asked about tobacco. There has been a 51 per cent. real increase in the duties on tobacco since we came to office in 1979, compared with a decrease in duty under the Labour Government. Manufacturers pleaded with us about the effect that our recent increases have been having on imported cigarettes. The hon. Member for Sedgefield was among those hon. Members who approached me and asked for a year off and such we gave to manufacturers. The presumption has always been that duties will be adjusted in line with the movement in prices from one year to the next—that is a medium-term judgment.
The hon. Member for Newham, North-East (Mr. Leighton), who is not with us, referred to the 1 per cent. of restart members who get jobs. That is the percentage of those who get a job straight from the interview. The Department of Employment does not follow up each interviewee, but a large number get jobs subsequently. The programme is only a first start.
My hon. Friend the Member for Reigate (Mr. Gardiner) asked about the higher rates of tax and my hon. Friend the Member for Eastbourne took up the subject of the marginal rate of tax. I draw their attention to the remark of my right hon. Friend the Chancellor in the Financial Times on 5 January, that we may well need to bring our top rate down further in the next Parliament.
There were speeches by northern Members, including the hon. Members for Jarrow (Mr. Dixon), for Burnley (Mr. Pike) and for St. Helens, South, tempered by a vigorous speech from my hon. Friend the Member for Delyn (Mr. Raffan), making a plea about the state of the north compared with the rest of the country. By chance I come to the debate as someone whose father in 1934 wrote a series of articles in The Times which are always described by historians of that period as having been the genesis of regional development policy. They related to the county of Durham where the constituency of the hon. Member for Sedgefield is located. Anyone who reads those articles would say they had been written about human beings in the manner that the hon. Member for Jarrow was discussing.
My hon. Friend the Member for Banbury (Mr. Baldry) said that the prosperity that we are enjoying in this country is spreading regionally and provincially and he quoted a whole series of statistics about advertising for vacancies around the country. There is no question but that prosperity is moving through the country as the economy expands. Since 1985, in the north-east and north-west, 31 major hospital buildings have been put up, 25 are under construction and 26 have been approved.
Since April 1985 eight roads schemes costing £40 million have been completed in he north-east and northwest and 45 schemes costing £482 million are in the forward programe. My hon. Friend the Member for Bexhill and Battle (Mr. Wardle) referred to the national 1133 insurance contribution. He has a new and unexpected ally in the right hon. Member for Sparkbrook, who said on 29 April 1985:the Labour party has never believed that such changes to the cost of labour and employment could contribute to the solution of the central problem of the economy, which is the reduction in unemployment.He also said:We have never believed that an adjustment in the national insurance contributions could be what the Chancellor regards as something synonymous with or comparable to a tax incentive which would in itself create more jobs."—[Official Report, 29 April 1985; Vol. 78, c. 35.]
The hon. Member for Burnley asked what happens when the privatised assets run out. That seems to be the same sort of rhetorical question that was asked earlier about what happens when the oil revenues run out. My right hon. Friend has demonstrated in the past 12 months with great vividness how strongly the economy can carry on even when oil revenues have been diminished. The hon. Member for Burnley also produced the curious suggestion that the Chancellor had kept the tax cut down to 2p so that he could reduce it further after the election. That suggestion is at somewhat puzzling variance, as were his other remarks, with the position that the Opposition Front Bench has been taking, that as soon as the election is over we shall be confronted by a crisis.
The hon. Member for Bradford, West (Mr. Madden), in addition to his more general remarks about the north, returned to the subject of Bradford universities and the cuts of 1981. Since the cuts occurred in non-scientific and technological subjects in the universities that he quotes, that argument is becoming a little tired and, considering the vigour with which those universities have recovered, we can now put it behind us.
My hon. Friend the Member for Delyn asked a specific question about redundant Courtaulds workers. The proposal in the Budget is for tax relief to be available from 6 April for training provided by ex-employers as well as current employers. Ex-Courtaulds employees may qualify but that would depend on the particular circumstances. The scheme will be most useful when retraining can be offered before redundancy, or very quickly afterwards.
The hon. Member for Barnsley, West and Penistone (Mr. McKay), who joined my hon. Friend the Member for Loughborough (Mr. Dorrell) in welcoming the falling unemployment, referred to gaming machines. The rise in duty there is simply taking indexation back to 1982, but I will look at what he said on alternative targets.
The hon. Member for Sedgefield referred to PEPs and recited various details about them. I think that after two and a half months it is a little early to be coming to firm conclusions about how that scheme is going. One recalls that it has taken 10 years, since the Finance Bill of 1978, to climb from the 30 companies that first started out with profit-sharing schemes that year to the total well in excess of 1,000 that we have today. In terms of Barclays' initial tranche, 23 per cent. were totally new shareholders. That is a remarkable statistic considering how much share ownership has grown over the last eight years, and the Inland Revenue survey suggests an average investment of £1,600.
I listened to the hon. Member for Sedgefield on the subject of privatisation and came to the conclusion that the way in which he was addressing himself to that subject 1134 was based on Marshal Foch's principle of attacking so that one did not have to defend. One of the questions to which the whole country is interested to learn the answer is what the Labour party proposes to do about those operations that have already been privatised.
I found the hon. Gentleman's argument curious because he criticised the Government for selling off assets that were income-producing when the Opposition constantly criticise the Government for the increase in net overseas assets and the income flow that the country receives from them. I thought that the reply that the hon. Gentleman gave to my hon. Friend the Member for Eastbourne was curious. Essentially, he said that whether the principle was right or wrong would depend on the amount of money involved. Since the amount of money involved in the Labour Government sale was £564 million—of course it would be a much larger sum today than that—I did not find his argument wholly convincing.
The hon. Gentleman quoted the British growth rate as against others. We are claiming our relative performance against other economies. The United Kingdom economy has grown faster than that of any other major country in the European Community.
§ Mr. Brooke
I will give way, but we are short of time.
§ Mr. Blair
If it is right to study comparative rates of growth—Britain and other comparable countries—is it not also right to judge inflation in those terms?
§ Mr. Prescott
§ Mr. Brooke
In this instance I will take my cue from the hon. Member for Kingston upon Hull, East (Mr. Prescott) and agree, "Not tonight".
With regard to the argument put forward by the hon. Member for Sedgefield, about productivity and output, it is our performance in productivity that has enabled us to achieve our economic growth. Since 1983 our export growth has been running at 54½ per cent. per annum, as against 31¼ per cent. under the Labour Government. Of central concern is what would be the effect on interest rates if Labour was, improbably, to gain power and brought in its suggested borrowing plans.
I owe an answer to the hon. Member for Colne Valley about corporation tax receipts. The receipts in 1986–87 are affected by investment in 1985 and not, as I believe the hon. Gentleman was alluding to, in 1986. As time moves on it is increasingly difficult to disentangle the effects of the 1984 reform from other factors influencing both profitability and corporation tax paid on those profits. The corporation tax reform that reduced the marginal rates was one of a number of measures to increase the efficiency, dynamism and well-being of the corporate sector. The increase in company profits speaks for itself. In the longer run, when the reform has worked its way through, it will mean a reduction in the tax burden borne by companies. The investment intentions survey suggests a 6 per cent. volume increase in investment in 1987 by the main industrial sectors.
We have been discussing practical matters today. I believe that the whole House will have read with interest the elegiac comments of Mr. Samuel Brittan about the speech made by the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) yesterday. The right hon. Gentleman has just become the biographer of Baldwin, 1135 but in an earlier age he was the biographer of the first Earl of Oxford and Asquith. His speech yesterday was riddled with the doctrine "wait and see." Indeed he reminded me of A. J. Balfour's remarks about the first earl:his lucidity of style is a positive disadvantage when he has nothing to say.If one adapts that to the right hon. Gentleman's speech and the alliance's attitude to income tax, it is clear that it is a disadvantage too when one wants to avoid saying something.
As the Walrus said:The time has come"—I quote from the alliance's new pamphlet—To talk of many things: Of shoes—and ships— and sealing wax—Of cabbages—and kings—And why the sea is boiling hot—And whether pigs have wings.But if one does not wish to talk about income tax, thenwhy the sea is boiling hot—And whether pigs have wingsis the epitome of the alliance's speculation. Unfortunately, not all of the right hon. Gentleman's supporters possess his adeptness.
If the alliance choose to talk ofwhy the sea is boiling hot—And whether pigs have wingsthe Government prefers the more mundane subject ofshoes—and ships—and sealing wax",the title of last year's bicentenary history of the Board of Trade.
Tonight I have one last announcement to make about the disclosure of importers' details. British industry is now well placed to compete effectively in both home and export markets. But one factor that will influence their success is the information available about their competitors in the market place. One particular suggestion, put forward cogently and most recently by the economic development committee for the knitting industry, has been that information should he made available from the records of Customs and Excise about the names and addresses of importers of individual products into the United Kingdom. Such a move would be consistent with the aim of facilitating the free flow of goods and information within the European internal market. The idea merits thorough examination, and officials will be consulting industry and commerce about such a move over coming months. Should the consultation suggest that the balance of advantage lies in favour of the extension of information currently made available, the necessary change in the Customs and Excise Management Act 1979 could be introduced in a future Finance Bill. If it is subsequently decided to go ahead, the aim would be to legislate in the Finance Act 1988 for implementation at the start of 1989.
§ It being Ten o'clock, the debate stood adjourned.
§ Debate to be resumed tomorrow.