AMENDMENT OF THE LAW

HC Deb 15 March 1988 vol 129 cc1017-37

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

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

[Relevant documents: European Community Document No. 9561/87, Annual Economic Report 1987–88 and the unnumbered document, Annual Economic Report 1987–88 (final version as adopted by the Council).]

5.27 pm

Mr. Neil Kinnock (Islwyn)

rose—

Mr. Michael Jopling (Westmorland and Lonsdale)

On a point of order, Mr. Deputy Speaker. After this afternoon's demonstrations, is it too much to hope that the House will at last take a grip of itself and, when people get themselves named in the way in which it happened this afternoon, we shall suspend them for six months without pay?

Mr. Kinnock

The Budget that we have heard this afternoon, especially the latter part of it, generated anger and resentment against the immense injustice of the attitude taken by the Chancellor of the Exchequer in his view of the best off people in our society and the gift, in excess of £2 billion a year, awarded to them in tax concessions. We compare that with the fact that he offered nothing at all to the National Health Service. We compare his handout to the richest in Britain with his offer of a puny, marginal and negligible amount to those who constitute the average people of our society.

In those circumstances, the anger generated is understandable. However, I believe that, faced with that situation, I, my comrades and my hon. Friends should take the view: do not get mad, get even. I assert again that in this House and everywhere else in this democracy argument is always superior to the form of action that we have seen this afternoon.

When the Chancellor reached that monumental concession to the best off, I noticed that the cheering from the Conservative Benches was even louder than when he made the concession on the standard rate. That is the system of values that is facing us. Those Conservative Members are the people who back the idea of making awards in the form of tax concessions that are worth 48p per week to those whose income totals £100, including various benefits, who offer £3.98 per week to somebody on £200 per week, such as a married man with two children, but who give £82.96 per week to someone who earns £1,000 per week. That cannot be right. It cannot be right in terms of incentives, because over the past eight years we have seen additional tax reliefs for the best off, but we have not seen a consequent increase in investment in this country — [Interruption.] Manufacturing investment is still 14 per cent. lower today than it was in 1979, despite the concessions.

I often wonder why Conservative Members feel that to get the rich to work harder they must give them more, but to make the poor work harder they will give them less. This afternoon we have seen a Budget upon which we shall have to rely on St. Matthew for apt, accurate and adequate comment, because literally, to a degree that has never been known before in this Chamber, "To them that hath shall be given even unto abundance, and from them that hath not, shall be taken away, even that which they have." That is what is happening. That is the only judgment that can adequately be offered on a Government who, in March, can offer immense tax relief to the richest, and in April will take away housing and social security benefits from those who are the poorest in our country.

We are constantly and rightly reminded that Governments do not have any money of their own—they have only the people's money. Against that background, which must enjoy universal support as a proposition, it can be said with absolute certainty that an overwhelming majority of the British people wanted their money to be dedicated to the National Health Service. They wanted that because they realise that the National Health Service is grievously under-funded. They wanted it because they value that service above all other priorities, even above immediate personal gain. They wanted it because they know that tax cuts do not buy treatment, that tax cuts do not pay nurses, that tax cuts do not open hospital wards or operating theatres and that tax cuts do not shorten waiting lists — [Interruption.] I hear Conservative Members saying that tax cuts do pay the nurses. Well, those hon. Members will have to face the nurses in their constituencies and say why a staff nurse, at the top of the current pay scale, gets £3.40 per week out of today's tax concessions, but even that will he eaten away when charges are made on nurses working in hospital.

There is no balance of justice in a Government who make such awards and at the same time deny the resources that are demanded by an overwhelming majority of people — people of all politics and of no politics, from every part of the country; people inside the Health Service, and those outside it; those who use the Health Service and those who do not. All those people have gathered together in a massive consensus, saying that today should have been National Health Service day.

In disregarding the emphatic preference of the British public the Chancellor has shown that while some people give their lives to the National Health Service, and some people owe their lives to the National Health Service, he does not give tuppence for the National Health Service. In refusing to listen to the priorities of the people — including, to their credit, many in his own party — the Chancellor earns public disdain that will not be repaired even if the Government meet the nurses' and health workers' pay award in a couple of months' time. Even if that were to occur—we can only hope that it will—it would still leave an immense amount to do to try to bring the Health Service out of crisis.

I make an appeal to the Chancellor even now. As a start, when he replies to the debate next Monday, he could seek to redeem himself to some extent by giving an undertaking that the deficits currently being carried by the health authorities will be financed so that they do not have to carry them over into the next year, thus ensuring that they begin the next financial year with disadvantage and undermining any award that is made to the nurses and health workers. The Chancellor could give that undertaking. If health authorities carry over those deficits, they start the year in disadvantage. The crisis of under-funding is then a disaster that is waiting to happen, as it most surely will without adequate funding before the end of this year.

To govern is to choose. It is a tragedy that even though the Chancellor has the means, and even though there is the most urgent need, the Chancellor has deliberately chosen not to make today National Health Service day. Then again he has not chosen to make it national anything day —[Interruption.] Not for 15 million people — [HON. MEMBERS: "It is Budget day."] All right, but it is Budget day also for those 15 million people—more than one in four of the British people—who will not benefit from the Chancellor's income tax cuts, some of them because they are too poor to pay income tax, others whose pay is so low that the Chancellor may be giving them a few pence or even a pound or so with one hand, but after 11 April the Department of Health and Social Security will take it away with the other.

This is not a "national anything" Budget, because there is nothing in this Budget to blunt the cutting edge of the changes that are to be made to the social security and housing benefit regulations next month. Some of the poorest people will lose up to 96p in any pound of gain that they make from tax concessions. We hear about the incentive effect of making tax cuts. Indeed, the Chancellor told us about it again today. He said, "There is a strong economy because of initiatives and enterprise and the incentives that come from tax cuts."

How would the right hon. Gentleman feel if he earned £105 or £110 per week and the marginal rate of tax on his income was 96p on what is already a poverty income? What about standing on one's own feet? What about incentives? What about the spur to go to work? I know what will happen when people decide that they cannot afford that disadvantage and retreat from work because they are being fined for going to work. The Chancellor and his colleagues will come here next year and give us further lectures about "scroungers". We will hear the Secretary of State for Social Services talking about the "dependency culture". How dare the Government say such things when they are doing this to our people and our country.

On top of that, a pensioner couple with modest savings automatically become disqualified from support from housing benefit as a consequence of having those savings. Where is the reward for thrift, or — to use the Chancellor's favourite word — "prudence", when such people are fined by the loss of their weekly help because they have taken care and have had the thrift to put a little bit aside to help them through their retirement?

It is not only the poor and the low-paid that the Budget does not serve. It does almost nothing to help those who are trying to export from Britain, but it does give some real help to those who are trying to import into Britain. There is hardly anything in the Budget for jobs in Britain, but there is a fair bit in it for jobs abroad. There may be some prospect for short-term growth, dependent upon credit and consumption in such an approach—there just might be—but there is no prospect of dependable, sustainable growth. That is the problem. The Chancellor's priorities never extend to encouraging investment in productive capacity, in research and development, in the training for skills and in the development of those skills. What we have had today is the extension of the business extension scheme — [HON. MEMBERS: "Expansion scheme."] Well, we shall see how much it will expand business.

That scheme offers an inducement to buy up houses and blocks of houses, and offers subsidies to the landlord at the same time as the Housing Bill, which is going through the House, will hammer tenants in both the private and public sectors. What an imbalance. It is not a business expansion scheme, but a Rachman expansion scheme. That is what will happen.

There is nothing in the Budget to lay or build the foundations for sustainable economic growth and for future strength in the British economy. That is the major reason why, after eight oil-rich years, our exporters' share of world markets in manufactures is down by 20 per cent. and our producers' share of the domestic market is down by 30 per cent. If we were gaining in the way that the Chancellor has sought to suggest, those figures would be reversed. We would be gaining substantial shares in the world and domestic markets.

In the eight oil-rich years, which have meant enormous bonuses to the Government and the Chancellor at a rate of at least £5 billion a year—sometimes twice or nearly three times that figure—they have never developed the economy, never sponsored production and never given us that extra competitive edge that would reverse the current position. That refusal to follow any systematic strategy to strengthen our industry is the major reason why our exports have gone up by 30 per cent.—yes, to record levels—while our imports, in the Tory years, have gone up by 50 per cent. This nation of modern makers and traders cannot sustain that continuing divergence between increasing imports and increasing exports at a much slower rate. Surely the Chancellor can see the rationale of that. Surely he must want to sustain our industry and to give our industrialists, the workers in the industries—the inventive people — a real fighting chance in the world market.

That chance has not come so far. That is why we can measure our trade deficit in this oil-rich country as £9.6 billion. That sum is too big to be balanced by the combined sale of oil and services. The Government have had this marvellous, unsolicited bonus of oil and what a judgment of them it is that they should he carrying a balance of payments deficit of any size when they are oil-rich, energy-rich and do not have to depend on the importation of those essential commodities.

The Chancellor has spoken about the gains in productivity and in competitiveness, and any improvements are obviously welcome. When we consider the international trade figures, the domestic market share and the balance in manufactured trade deficit, we may say that the Chancellor, in balancing his Budget, deserves the name "Lucky Lawson". However, in terms of balancing the trade of our country he must be known as "Loser Lawson"— that is the only name that fits.

What about the Budget surplus? That surplus has come from three major sources. The first is oil revenues—the £6 billion a year about which the Government have spoken. The second is the upsurge in VAT receipts. VAT has been substantially levied on the massive increase in imports. They have been bought with credit and have therefore added immensely to the general problems faced by the Chancellor in dealing with the economy. Indeed, the extent to which credit and debt have increased for British households under this prudent Government, this non-borrowing Government, has meant that domestic debt has increased from £80 billion a year—less than a third in equivalent value to GNP—to £280 billion a year—two thirds in equivalent value to GNP.

I am sure that the Prime Minister would say: Neither a borrower, nor a lender be". That represents the old-fashioned Grantham prudence that the right hon. Lady learnt. Well, she does not recommend it to the rest of the economy, because the stimulus to growth about which the Chancellor has been proud to talk has been sponsored and substantially sustained, not by any virile developments in the economy or a new competitiveness, but as a result of a massive expansion of household debt in our country. A bill must be paid.

The third area from which Budget surplus has come is the once-and-for-all sale of national assets at the rate of about £5 billion a year. On that basis, anyone who has a house could make a budget surplus. All that he has to do is sell his house and move into rented accommodation. For a few years he would have a budget surplus, but he would not have a house to go back to. He would have lots of money, but no security. That is how the Chancellor has money to spare. The sell-offs cannot be sustained, any more than the VAT revenues or the oil revenues can be sustained. They are all short-term bonuses bringing short-term benefits from someone who is now becoming a short-term Chancellor.

Our country must succeed in the long-term, and that is why the priorities in this Budget should have been investment in production, investment in export and sales, in research and development, in health and social justice. Such an approach would have meant not only that the Government were making proper provision for our strength in the future, but that, in the present, they would be increasing competitiveness, combating the expansion of debt, using national resources in a way that does not significantly add to imports or inflation, generating employment—full-time, properly paid jobs, not schemes that offer half-time, quarter paid jobs that are part of the repair outfit employed by the Government. That approach would have represented real prudence and real profit to our country and our people. The Budget does not offer that. This Chancellor has again, put the wealth of the very few before the wealth of the nation, and always before the health of the people.

Mr. Eric S. Heffer (Liverpool, Walton)

On a point of order, Mr. Deputy Speaker. During the course of the Chancellor's speech—[nterruption.]

Mr. Deputy Speaker (Mr. Harold Walker)

Order.

Mr. Heffer

During the course of his speech, the Chancellor, in a snide comment, referred to my right hon. Friend the Member for Leeds, East (Mr. Healey) as being "obsolete". That is in line with the comment made by the Prime Minister the other day that Labour has no guts. I will now point out to the House, to those few Members on the Conservative Benches, that my right hon. Friend had a distinguished war record and was a beach master at Anzio. Some of us who were in the forces during the second world war resent such statements.

Mr. Deputy Speaker

Order. The hon. Gentleman has made his point. I did hear the expression and, discourteous and offensive as it might have been, I do not think that it was unparliamentary.

5.49 pm

Mr. David Knox (Staffordshire, Moorlands)

If hon. Members consider the last hour, some will conclude that the House has not covered itself with glory. I hope that in the next 10 minutes I shall be able to reduce the temperature a little and deal with some of the issues raised in the Budget.

Mr. Deputy Speaker

Order. Will those hon. Members who are leaving the Chamber do so quickly and quietly, please?

Mr. Knox

I want first to congratulate my right hon. Friend the Chancellor on his fifth Budget speech. His previous four Budget speeches were well constructed, to the point, and commendably brief. Today, my right hon. Friend has maintained the high standards that he established on those occasions and produced an interesting and skilful Budget. Hon. Members should be grateful for that at least, even if they do not necessarily agree with the provisions in the Budget.

My right hon. Friend has presented a complicated package this afternoon which requires and deserves deep study rather than too much instant reaction and comment. Let me warmly welcome some of the Budget's features.

I warmly welcome the changes in what my right hon. Friend called the taxation of marriage. I am pleased that husbands and wives are to be taxed separately in future. I would only say that I suspect that not all married women will wish to take advantage of that when they come up against the problems of dealing with their own taxation.

I also welcome the increase in the VAT threshold to £22,000. I do not complain too much about the increases in the duty on alcohol and, as a whisky drinker, I am pleased that there is to be no increase in that area. The Scottish nationalists can at least take some consolation from that.

I welcome the changes in capital gains tax. There will certainly be much more equity in its operation in future. But I must confess that, probably like most hon. Members, I was surprised that it was possible to make such changes at such low cost to the Exchequer.

I welcome, too, the change in the thresholds and the increase in income tax allowances. That was double the necessary rate on the basis of the Rooker-Wise-Lawson amendment in the late 1970s. It is noteworthy that personal allowances are now worth 25 per cent. more in real terms than in 1978–79.

As a Member of Parliament representing a largely rural seat I was not quite so keen — and I know that my constituents will not be quite so keen—on the increase in petrol duty. However, we have been used to such increases from both Labour and Conservative Chancellors for some considerable time.

The specific measures in any Budget are usually quickly forgotten, and, rightly or wrongly, I have no reason to believe that that will be any different on this occasion. But the consequences of the measures in this Budget, as in other Budgets, and of other decisions in the economic sphere will be with us for a long time.

Of course, we are not complete masters of our own destiny. Our economy is influenced by international economics and decisions taken by other Governments. However, I have noticed that that tends to be exaggerated by Governments when things go wrong and under-estimated when things go right. Nevertheless, a balance must be maintained and we should be careful not to pretend that we have no control over what happens in Britain.

My right hon. Friend has been faced today with much more difficult decisions in the Budget than most commentators have acknowledged. It is too simplistic to suggest that, because of the buoyancy of revenue, it was merely a matter of determining the size of the tax cuts. The current state of the balance of payments placed substantial constraints on his freedom of manoeuvre. At the same time, it was important to maintain and increase the level of domestic demand to ensure a continuation of the high rate of growth of the past few years and the consequent fall in unemployment. Therefore, my right hon. Friend was right to use some of the substantial surplus to maintain growth, and his Budget judgment, although generally cautious, was probably about right. However, I am not so sure about the make-up of his package.

After having had a sizeable balance of payments surplus for some years, there has been a deterioration in the past two years. Although last Friday's revised figures showed that the situation in 1986–87 had not been as bad as had been assumed, the situation is far from satisfactory. The revised figures show that we had a small surplus of £46 million in 1986 but that that had deteriorated into a deficit of £1.68 billion in 1987.

In the current year, as my right hon. Friend warned us this afternoon, there is likely to be a further deterioration in the balance of payments. It may be true that we can afford to run a deficit in the short term, but we cannot afford to do so indefinitely. In any event, it would be folly to dissipate the massive capital investments overseas that have been built up as a result of North sea oil over the last few years by consumer spending.

Unfortunately, that may be one of the consequences of today's tax cuts. Although I am sure that the tax cuts will be popular with the recipients, they will generate more consumer expenditure. In recent years there has been a strong tendency for additional consumer expenditure to find its way into an increased demand for imports rather than merely for the product of our domestic industry.

Therefore, my right hon. Friend's tax cuts involve a risk that some of the extra money released will find its way into imports. Since we are already in deficit on the balance of payments, and are heavily in deficit in trade in manufactured goods, it was unwise at this time to introduce tax cuts and so risk imposing further strains on an already weak balance of payments.

In the particular circumstances that obtain at present, I would have preferred my right hon. Friend to dispense his largesse in the form of public expenditure projects where import potential would be low or non-existent. In that respect, the N H S obviously comes to mind. Unlike the Opposition, I do not complain that there has been a reduction in expenditure in the Health Service over the last few years. That is not true. We all know that the only cuts in the Health Service that have taken place in the past 20 years took place under a Labour Government. None the less, it is possible further to increase expenditure in the Health Service and I would have preferred to see that done today. Apart from anything else, an increase in public expenditure would have enabled us to maintain a buoyant domestic demand and so protect the balance of payments. To me, it would have seemed a safer choice in the current conditions.

Having said that, I want to emphasise my support for my right hon. Friend's Budget judgment because of the importance of maintaining a high level of demand. Over the past 18 months the buoyancy of demand has enabled Britain to achieve a high growth rate, and, as a consequence of that, unemployment has fallen from 3.25 million to about 2.5 million—[Interruption.] I do not know whether the hon. Member for Glasgow, Cathcart (Mr. Maxtor) thinks that this is funny, but the 750,000 people who are no longer out of work, but who were 18 months ago, welcome that warmly. The Budget will maintain that buoyant demand.

Of late I have detected an increasing complacency about unemployment, and there have been some rather silly suggestions in some quarters that our economy is becoming over-heated. As long as 2.5 million people are out of work that complacency is unwarranted and the idea that there is over-heating is nonsensical. Between 1945 and 1974 we had almost full employment. It is true that the level fluctuated a little, but throughout that period we managed to maintain employment at a high level. Twice, briefly, unemployment exceeded 1 million and twice, also briefly, it was as low as 1.1 per cent. of the working population. That was in 1955 and in 1965.

When we look at what was possible during the 30 years after the war, we can see that we have a long way to go to get unemployment down from 2.5 million to a level that is acceptable to our people. To achieve this, an essential prerequisite is the continuation of a high rate of growth, and I believe that my right hon. Friend's Budget will achieve that. However, as I have explained, I would have preferred the public expenditure route to have been taken rather than the tax-cut route.

Another prerequisite for reducing unemployment is that sterling should not be overvalued. We all remember the dreadful damage done to British manufacturing industry and employment in the early 1980s when sterling was overvalued. The recent increase in the value of sterling is deeply worrying, although I welcome what my right hon. Friend the Chancellor has said about that this afternoon. I hope that he will continue to do everything that he can to reduce the value of sterling to a more sensible level, and that he will do that by reducing interest rates and taking whatever other measures are necessary. I hope also that he will continue to pursue the highly successful policy of exchange rate stability that he has pursued for the last 12 months.

Among other things, that means that Britain should join the exchange rate mechanism of the European monetary system, because that would give us much greater stability for more than 60 per cent. of our trade. This is long overdue. I hope that my right hon. Friend will not let ideological obsessions divert him from exchange rate stability and from British membership of the exchange rate mechanism of the EMS. This would be greatly in the interests of our economy and of the economy of Europe, and ultimately it would be greatly in the interests of the world economy.

6.2 pm

Mr. Stuart Bell (Middlesbrough)

I am grateful to be called by you, Mr. Deputy Speaker, so early in this debate. In my five years in the House this is the most important Budget statement that I have heard. I came into the House in 1983 when the Chancellor made his first Budget speech. This is one of the most tempestuous Budget speeches that we have heard. The reason for saying that is clear, because the speech demonstrated the divide in philosophy between the Government and the Opposition. That was most precisely marked when we discussed the reduction in the top rate of income tax to 40 per cent. That showed the divide between the Opposition and the Government.

If anything, this is the most capitalist Budget that we have seen in the House this century. The Economic Secretary to the Treasury nods his head in approval. It is an offensive Budget to all our people. It is wrong to believe that our people wish to have tax cuts at any price—cuts that will benefit their pocket to the detriment of people as a whole. It is also wrong to suppose that we can ignore the spontaneous clamour in the National Health Service about the cuts that have taken place there.

The Chancellor gave a series of figures about the increases in public expenditure, and at Prime Minister's Question Time the Prime Minister also gave those figures. Those are the normal increases that we see in society year in, year out, and they are a reflection of inflation and pressure on the economy. They do not reflect real spending in the economy.

Hon. Members should consider what the Government have been doing in the Health Service. In Middlesbrough a hospital was closed because the health authority had to save £1 million. It made that saving by closing the Carter Bequest hospital.

It was wrong of the Government to give the nurses their pay increase before the last election and then to say to health authorities that they had to fund it out of savings. Obviously, it was right to give the nurses the benefit of an increase, but the way in which the Government funded it was wrong, and that has been the cause of the disruption and spontaneous protest in the Health Service. The Budget has not done anything to rectify the imbalance that is creeping into our economy. The public services are being starved of money, but a wide range of people will do well out of this Budget.

The Chancellor said that by reducing the top rate of income tax to 40 per cent. those on top incomes will work harder. That simply repeats the shibboleth that we have heard for many decades that people will work harder if they are given such an incentive. In this leisure world it is more probable that people will use the extra money to improve the quality of their life and to enjoy the leisure facilities that are available to them. In any event, there is no evidence whatever that people in business, those with responsibility, will be prepared for financial gain to work harder than they work now. That is one of the great shibboleths of our time and it is certainly one of the shibboleths of the Government.

People who are not so well off will gain nothing from the Budget. In 1979, I remember sharing a platform in Newcastle with Jack Jones, the leader of the Transport and General Workers Union. Mr. Jones told the audience that if the Conservatives were elected they would cut the benefit link between earnings and price rises, whichever was the higher. That was the basis upon which benefits were based. That was our philosophy, and we aimed to protect people who could not protect themselves by giving them the benefit of an increase either on the basis of increased earnings or increased prices. The Conservatives said that they would cut that link, and that was the first thing that the then Chancellor in the 1979 Conservative Government did. He based the increase in benefits not upon earnings but upon price increases. Inflation has come down and earnings have risen above inflation, and we have seen the gap between those who have and those who have not growing steadily. That is a direct consequence of Government policy and philosophy, and it is creating tensions and pressures in our society.

The argument has often been advanced that there is a link between violence on our streets and unemployment and that it is between those who have hope and those who have not. The Budget will do less for those who do not believe that they have a place in our society than it will do for the better off. The essential philosophy of the Opposition is that we want to see an egalitarian society. The priorities that we have had since the 1970s are not the priorities of the Government. One of our priorities is to keep people in work.

The Chancellor said that the Budget surplus was £3,000 million. It is perhaps no coincidence that we have 3 million unemployed, because it means that for every £1,000 of surplus there is a person unemployed. That is wrong. This is a financial Budget, not an industrial Budget. It will do nothing for our trade or industry and it will not lead to more investment in industry. We would like to see interest rates coming down. That would help industry, because the cost of borrowing would be lower and investment would go up. The Budget placed no emphasis on jobs or on the investment that we want to see in industry. It does nothing to encourage investment in manufacturing to offset the balance of payments crisis that is coming on our manufactured goods.

That brings us back to Tory philosophy. Getting rid of the exchange rate in 1979 led to massive investment in the United States, and now in Europe, by British investors. In the last Parliament I asked what was the return on that investment, and a Conservative Back Bencher, Mr. Stefan Terlezki, who is no longer a Member, said that it was £5,000 million a year. That is a return to Victorian values. In the last century, that was how our economy worked. Our balance of payments deficit on manufactured goods was covered by the invisible earnings of the City of London.

Why has that investment not taken place here? Why was it more fit and proper to invest in real estate in the United States, Germany, France and Belgium than to invest in our own industry? That philosophy has turned out to be not simply anti-worker, but anti-British. It has reduced our future status as a nation state.

The Chancellor is storing up many troubles and difficulties for the years to come. As was said by my right hon. Friend the Member for Islwyn (Mr. Kinnock), our economy was based on the oil revenues, which went up again after Sheikh Yamani resigned in Saudi Arabia. The figures are clear: the public sector borrowing requirement has gone down as the oil revenues have gone up. Those revenues have simply been used to ensure that we, as a nation state, do not borrow money.

As the nation, under the present Government, does not borrow the money, where does the money go? It does not crowd out any more the private sector; it goes straight from the Treasury to the City of London. Over the past few years, the alliance between the Treasury and the City has supervised the sale of national assets. When the Conservatives came to power, they wished to sell those assets on the basis of a doctrine: they did not believe in natonalisation.

The concept of privatisation is legitimate. It was an ideological commitment that the Conservative party made at the time of the 1979 general election. But, as the public sector borrowing requirement came down, the City of London was able to take up more and more public assets. Now the Secretary of State for Energy is about to privatise the electricity industry for £28,000 million, and the money is there because the Government have ensured that it should be.

As well as the sale of assets and North sea oil, there is the massive consumer boom referred to by my right hon. Friend the Leader of the Opposition. That boom is based on plastic money. Although interest rates are at 28 or 30 per cent., people are prepared to indulge in the consumer society as long as they can use plastic money and the payment is made later. They do not look at the 28 per cent. interest rate. That, too, will be a problem for the Government, but it is a house that they have builded over the past five years.

Having sat through five Budget speeches, I feel that we, as a nation, have been set up for the launch of a capitalist society. The Government do not mind a man standing on his own two feet, as long as he stands on the backs of those poorer than himself. The moral lesson that they wish to teach is: "Stand on your own two feet, but stand on the back of someone poorer than yourself who has not got and will never have your advantages."

The divisions in our society are getting deeper and deeper. This is a financial Budget, but it is also a political Budget, cynically aimed at those who are doing well in society in the hope that those who are poorer will not understand it, and that those who are doing well will be seduced into not caring for their fellow man. That is the wrong philosophy, and it will backfire. The day will come when there will be a backlash against the Government's principles — against the idea that money is all that counts, and that people do not count. When that backlash comes, there will be a significant turning of public opinion away from this Government.

6.13 pm

Mr. Alan Haselhurst (Saffron Walden)

I am grateful for the opportunity to make an early contribution to the Budget debate, Mr. Deputy Speaker. I do so with some diffidence, however, because of the penalty faced by those fortunate enough to catch your eye so soon after the Chancellor has sat down. They deny themselves the opportunity to read a more careful analysis of the Budget in the press the following day, when those who are expert at analysing such a major and complex financial statement are able to present it in perspective. We, who may have missed subtle details, can then understand the full implications of the statement for various aspects of national life. Inevitably, my own contribution will not be aided by that expert opinion. It will be based merely on immediate reaction.

It may not surprise some of my hon. Friends to hear that I find much with which to agree in what was said by my hon. Friend the Member for Staffordshire, Moorlands (Mr. Knox). I shall not repeat his observations line by line, but I shall start, as he did, by congratulating my right hon. Friend the Chancellor. His speech was most impressive. This is a positive Budget, and, like my hon. Friend, I believe that my right hon. Friend's judgment is about right. I welcome the Budget's reforming aspects.

If my right hon. Friend can be said to have risen to the occasion, the Leader of the Opposition and the Labour party certainly have not. I am surprised that the right hon. Gentleman was prepared to insist, both today and before the event, that this was meant to be a Budget for the National Health Service. Apart from misreading what the Budget is about, as opposed to the Autumn Statement on public expenditure—[Interruption.] If the hon. Member for Durham, North-West (Ms. Armstrong) wishes to gain a reputation in the House for making sedentary comments, so be it, but I am not prepared to give way.

The Budget is not about making decisions on extra public expenditure. The public have been considerably misled by the Opposition campaign in that respect. I am wholly committed to the success of the National Health Service, and I believe that the Government's record is much better than Opposition Members allow. They conveniently forget their own record on the NHS. Of course it is wrong that people should be kept waiting for such an important state service, but it has always been true that the list of things that we want to do—in health, in education or in any other regard—remains long, and lengthens as our expectations increase. That is bound to continue. The test of the Budget is whether it will control the economy in such a way as to ensure that more resources are generated for the Government to sustain such services.

I believe that the record of the present Government, and the present Chancellor, is very good. Certainly it is superior to anything done by previous Labour Chancellors.

Mr. David Winnick (Walsall, North)

Will the hon. Gentleman give way?

Mr. Haselhurst

Not in the short time that remains. I am sure that the hon. Gentleman will understand.

The right hon. Member for Islwyn (Mr. Kinnock) would have done better to listen to his hon. Friend the Member for Middlesbrough (Mr. Bell)—whose maiden speech I once had the pleasure of following—and to consider the Budget from the point of view of the success of British industry. That success is also tied up with the amount of resources to be generated for my right hon. Friend and his successors to fund services such as the NHS. The real test of the Budget is what it will do to sustain the economy, and industry within the economy.

My right hon. Friend said that there was a need for industry to keep firm control of its costs, and I agree with that. However, he has an opportunity to help industry to control its costs. I applaud the effort to retain a stable currency. Many industrialists have told me that they are prepared to settle for an exchange rate with either the dollar or the deutschmark, which may not be ideal for their businesses, if they can at least reckon on its being stable and continuing for a year or more. It is the constant change that is disruptive and makes business planning so difficult. A Budget that can help ensure currency stability as far as is possible is to be welcomed, and I echo the comments made by my hon. Friend the Member for Staffordshire, Moorlands, who said that the Government should take the decision to join the exchange rate mechanism of the EMS. That would help the Government to manage the exchange rate for the benefit of our industry.

I also hope the Budget will help to reduce interest rates, which is also crucial to industrial development in many sections of industry. Such a reduction is not the only thing that affects investment decisions, but in certain industries it has an effect, so it is important to reduce interest rates to achieve an overall improvement in our investment rate.

It is also important that there should be enough resources for industry to engage in a faster rate of research and development. It is truly alarming that there is a widening gap between us and some of our competitor countries in Europe in this area. I do not need to be associated, as I am, with a number of industrial companies to be able to make that point in a purely generic way. It is vital to remedy Britain's backlog in research and development, and I had hoped that the Chancellor might have found an extra 1 or 2 per cent. to take off corporation tax. I know that the Chancellor is proud of his record on corporate tax, but any further margin that could have been found to encourage industry to invest more in research and development would have been welcome.

The Leader of the Opposition is also wrong to make the NHS the criterion by which to measure the Budget as opposed to the need to move towards the creation of a single European market within the Community. I should not be averse to moves towards tax harmonisation, which will surely come upon us. I am probably a lone voice in the House in not being prepared to say that some of the rather difficult political decisions that will be involved in tax harmonisation for the British Government should be seen as obstacles to the creation of a single European market, which would benefit this country enormously. I am prepared to take as objective a view as possible of the Government's negotiations on that. If the Chancellor had wanted to chance his arm with one or two moves in that direction today, I would not have grumbled.

On the other hand, the Chancellor has moved independently on petrol and cigarette duty. I welcome the further boost that he has given to "clean" cars through widening the differential between unleaded and leaded petrol—and he could have widened it still further. That would have been a further help. He remarked on the number of stations that now supply unleaded petrol, and it shows a gratifying rate of increase, but there are still not enough of them for customers to be able to rely on unleaded petrol being available at their local stations. I have counted only one in my constituency so far. So I welcome what my right hon. Friend did, but he could have gone further—perhaps at the expense of imposing a greater tax on cigarettes. If taxation can be used to emphasise the need to be environmentally sound, that is good.

I particularly welcome the fact that my right hon. Friend has doubled the rate of increase in the tax threshold —doubled what it would have been if it had been kept at the rate of inflation. That must help many people in the country, especially prudent elderly people who have put money by. So, although some of them may suffer from changes in housing benefit, this may be a way of compensating them, because probably quite a large number of them are taxpayers.

I am glad that the Chancellor emphasised improving thresholds as much as he did. In some ways, I am surprised that his reforms did not go further on mortgage tax relief. He would find that many of us are prepared to think the unthinkable and tackle some of the special exemptions to which he referred, so that a lower rate of personal tax could be achieved in due course. He will have to return to this issue if he is to achieve a standard rate of 20 per cent.

Unlike the hon. Member for Middlesbrough, I did not find this an offensive Budget. It is designed to maintain economic growth in the country, which is the best guarantee of improving the living standards of its people. I hope that the Government's policies will be designed to improve the living standards of all our people, and I believe that the Budget will help to maintain that prospect this year and in the future.

6.25 pm

Mr. James Wallace (Orkney and Shetland)

Having now heard five Budget speeches from this Chancellor, I would not mark them high for technical merit, but he has a well-crafted method of putting them over and gets high marks for artistic impression. His speech today was subject to disturbances, and, however much one understands the strong reaction to some of the Chancellor's proposals, it is a sad day for free speech in the House of Commons if unpalatable views have to give way to the tactics of the terraces. I hope that that was a passing aberration that will not become a more regular feature of our debates.

The background to the Budget has been canvassed in the press over many weeks. The hon. Member for Staffordshire, Moorlands (Mr. Knox) said that he despised any comments to the effect that the economy was overheating. While I agree in a general sense, he would probably accept that, in the more prosperous parts of the country, there are bottlenecks, with localised overheating and inflationary pressures. The credit boom is evidence of that. At the same time we have an increasing balance of payments problem. Today, the Chancellor minimised that when he said that there would be a £4 billion current account deficit by the end of the year—but that was only about 1 per cent. of GNP. If he had been sitting on the Opposition Front Bench, he would have made rather more of that.

I fear that the Budget's approach will not help these problems. The Chancellor had an opportunity to do something constructive with the revenues that he has, but he seems to have missed it. The bulk of them will go on tax cuts for the rich. I generally welcome the increase in thresholds that has been mentioned. It will take many people out of tax, but there is nothing in the Budget for those who are not in employment and whose income will possibly fall as a result of social security changes at the beginning of next month. They never even get to the present thresholds, let alone the higher ones. Even those who will benefit to some extent from the increase in tax thresholds may find themselves disadvantaged by the interaction of the tax system and employee's national insurance contributions which, for some, can produce high marginal rates of tax as they move into taxable wage levels.

Mr. Kenneth Hind (Lancashire, West)

Will the hon. Gentleman give way?

Mr. Wallace

There is little time, and other hon. Members want to speak.

I doubt whether the tax cuts that have been proposed will take the heat out of the economy in the parts of the country that appear to be overheated. As the hon. Member for Middlesbrough (Mr. Bell) said, there is no substantive body of evidence to show that if highly-paid people are taxed less they will produce more and their enterprise will be stimulated. I suspect that the vast majority of people who have been paying the high levels of tax are not in the sort of wage structure in which they are paid for doing overtime. It may be suggested that if people have more money they will use it to increase their leisure facilities and possibly buy more luxury consumer goods. So, although the Budget may well be a vehicle for growth, it may prove to be a vehicle for growth in some of the countries that export to us. It is more likely to add to our balance of payments problem than to solve it. The balance of payments problem could be exacerbated further if the value of the pound were allowed to go up and our exports became less competitive.

With regard to our competitiveness, the Chancellor's comments were interesting. He said that the onus would always be on employers to keep down unit costs and wages in order to make their goods more competitive. That comes rather oddly from a Government who, when they started out in 1979 totally hooked on monetary policy, saw little role for cost-push inflation; it was all subject to the money supply. Wage rates, on their theoretical analysis, had little to do with it. There now seems to be some appreciation that labour costs are a factor, as indeed would be an increasing value of the pound.

I agree with the hon. Members for Saffron Walden (Mr. Haselhurst) and for Staffordshire, Moorlands on the importance of a stable exchange rate. We on this Bench have for many years advocated membership of the exchange rate mechanism of the EMS. One suspects in one's heart of hearts that that is what the Chancellor would have loved to announce today, but it would appear that 10 Downing street is the one thing that stands between Britain and membership of the EMS.

Equally important, and related to this, is interest rate policy. Many would like to see interest rates come down in order to stimulate investment. The Chancellor is caught in a dilemma. He is worried, as he indicated at one stage in his speech, that by reducing interest rates he might give a further twist to the credit boom. Perhaps we have used interest rates for too long as a sledgehammer. If they are increased, this affects companies' willingness to invest and has an effect on young couples who are thinking of buying a house but are looking at the mortgage payments. It may well be time for us to start looking again at the introduction of credit controls. Hire purchase controls would perhaps have been a better way of controlling that side of the economy, without having to resort to the use of interest rates, which have so many other ramifications.

Just as fundamentally, this Budget strategy is wrong in the long term. The Chancellor has boasted about the receipts from the sales of capital assets, but it is quite clear from what he said to the House, in terms of his strategy, that the receipts from sales of capital assets are not going to be reinvested in the economy. We have argued for a long time that the prudent use of receipts from these asset sales would be investment in the fabric of our infrastructure; for example, in our housing. Far more could be done about the housing problem and the problems of the homeless if some of the receipts from the sales of council houses were used in a housebuilding programme rather than as tax relief for Rachmanism which the Chancellor announced in the context of reforms to the business expansion scheme.

We also want to see investment in a proper training programme which will enable our work force to be reskilled, and, as indicated by most Opposition speakers, investment in the National Health Service. The Select Committee on Social Services has indicated that a sum of £1.9 billion is needed by the National Health Service to meet its current crisis. I believe that it is increasingly being realised that the proposal that we put forward as a party at the last election for a 2 per cent. real increase in National Health spending showed very sound judgment. That is the sum of money that is needed to meet the ever-growing challenges to the Health Service of people living longer and of modern techniques in medicine which open up the range of opportunities and of services which the NHS can provide. There is no point in having a wealthy nation if we do not also have a healthy nation. Growth in this country and our long-term economic prospects depend to a very important extent on our having a well-educated, healthy nation. To squander oil revenues and receipts from the sales of assets in current expenditure and not invest in our people and our infrastructure is to be very short-sighted indeed.

The Chancellor identified the advantages which flowed from his reform of corporation tax in 1984, and pointed out how it had stimulated investment, particularly from companies outside the United Kingdom, and brought about a better quality of investment. We very much regret that he did not follow through the logic of that argument and, as his predecessor did in 1982, announce a staged reduction in corporation tax down to the rate that he has now set for the basic rate of income tax. That would have been a further welcome boost to our manufacturing industry.

It certainly rankles in a constituency such as mine, with a very large number of small business men and small businesses which are unincorporated, that the abolition of capital allowances, which went hand in hand with the reduction of corporation tax some four years ago, brought no benefits to many small business men and self-employed people. I know that the share fishermen in the Scottish fishing industry have made many representations to the Treasury on this and the effect that it has had on industries such as theirs. I hope that in the course of the passage of the Finance Bill further sympathetic consideration will be given to that.

On the subject of excise duties, I welcome the differential for beer of a lower strength, but I wonder about the Government's commitment to trying to discourage young people from taking to drink when they do not propose to increase the duties on spirits. There are two distilleries in my constituency and in the short term it might be seen as a welcome relief that there has been no increase. But I think that the whisky industry would much prefer a statutory maturing allowance, which, indeed, it has called for on a number of occasions, to a short-term break in the inflation-linked increase of exise duty. After all, people in my constituency who are dependent on cars might wonder why they have got to pay more for their petrol, above the rate of inflation, while those who drink whisky and gin are going to get off scot-free, if not Scotch-free.

Generally, we welcome the reforms which have been announced with regard to the taxation of married couples, but the detail of those proposals will merit close examination. The allowances which are being given to both husband and wife in terms of capital gains tax provide yet another example of the way that this Budget is very much slanted towards the rich — the haves —rather than to the have-nots. The principle of equal treatment is one that we would accept, but we shall wish to pay serious attention to the small detail.

I know that many other hon. Members want to speak, so I will not go into any further details. Generally, I think that the impact and overall impression of this Budget will be that the Chancellor has missed an opportunity. He has looked at the short term and given to those who have; he has not looked to the long-term interest of building up the education, health and infrastructure of our country and, in particular, the need to pay attention to those most in need.

6.36 pm

Mr. John Stokes (Halesowen and Stourbridge)

I am sure that I am not alone in feeling very sorry indeed that this debate, which is not a very long one, has been shortened by over half an hour owing to two completely unnecessary Divisions and because of a disgraceful scene which led to the sitting being suspended. I feel that I am not alone in believing that that scene was very damaging indeed to the House. I am only grateful that we did not have television cameras here, because what would the British public think of us?

I always look forward to my right hon. Friend the Chancellor's speech because he is a professional, and he enjoys his professionalism. He has played a vital part in the success of the Government in setting the scene for the policies which have created widespread prosperity among all classes. Also, we owe a great deal to him for our triumph in the last general election.

I thought that the Budget was ably thought out and most ably presented. It was, as I expected it to be, both reformist and prudent. What a long time it seems now since we had that long series of doleful Labour Budgets in the 1970s. The tide was turned by the stern Budget of the Conservative Government in 1981, which started to squeeze out inflation from the system. From that time, progress has been steady and all kinds of severe difficulties have been overcome: for instance, the cost of the Falklands war, the expense of the very long coal strike and the loss of revenue through the collapse of oil prices. Public expenditure has been contained and people's energies are being harnessed for the good of the country.

There is, I know, a cry from the do-gooders—and I hear it also in the General Synod of the Church of England—that more taxpayers' money is the answer to almost every problem in this country. In fact, experience shows that far too much taxpayers' money has been spent in the past in, for instance, propping up dud companies, trying to force companies away from their natural places of business to places where they do not want to go, and all kinds of rather spurious public works.

The intellectual progressives have a puritanical attitude to reductions in taxation. They believe that the state should think for us. I believe that the individual should think for himself. He is the best person to decide what to do with his own money, some of which the Chancellor has given back to him. He can decide whether to spend the money, whether to save it or whether to give it away. How glad we all are that so much more is being given to charity.

Certainly my constituents in the industrial heart of England will be pleased with the Budget, because, contrary to many Opposition Members, I am glad to say that many of those skilled men and women are in work and will be very pleased to be paying less tax this summer and to be getting more of what they earn.

Mr. Doug Henderson (Newcastle upon Tyne, North)

Will the hon. Gentleman give way?

Mr. Stokes

No; time is short.

In the bad times, when factory after factory was closing in my constituency, and the situation was worse than it was in Scotland and elsewhere, people never complained, and now they do not like industrialists and the CBI constantly moaning. They have never held out a begging bowl and they have never expected a handout. They picked themselves up, and paid more attention to marketing and sales. They greatly improved the performance of their companies and many new businesses were started. My constituency is now enjoying prosperity which the people have richly deserved. Confidence is returning, not only in my constituency, but throughout the west midlands. The amount of export trade, particularly for small companies, is staggering. I wish only that that good news would get into newspapers, in particular the local newspapers.

However, I am still not satisfied that enough financial help is being given to those who start up new businesses, either in the form of grants or loans from the Government, or through loans from the banks. When I visit new businesses, I find that all too often the criteria for loans seem not to fit many individual cases. It is curious that the banks should be so prodigal in lending to the Third world where they have lost billions of pounds, yet so Scrooge-like in lending to English companies where the risk is obviously very much less.

The cuts in personal taxation at all levels are bold and sensible. Contrary to what some Opposition Members say, they will encourage good, hard-working people to work even harder. I certainly do not object to the new arrangements for the curtailment of perks. The main benefits to a person in work should be in his earnings, which should be taxed at the lowest rate possible.

I very much welcome the long overdue improvement for married women.

I accept the increases in taxation on cigarettes, but I am sorry that tax has been placed on petrol and not on whisky and gin, and I hope that the Chancellor will think again about that.

The country is now starting to believe in its own success and the success of Government policies. In Britain, we have such brains and such ability that there is nothing that we cannot do if we turn our minds to it. Foreigners look with envy to our economy and to our Prime Minister. The only small cloud on the horizon is the amount of money and credit which perhaps is slopping about a bit too much in the economy, and whether the present rate of growth can be sustained. I hope that it can.

I believe that the situation can be contained if the Government maintain the strictest control on the supply of money, and if industry can increase productivity, control wage costs, and, above all, can manufacture more of the products which are still flooding in from countries such as Germany and Japan. However, this is a problem of success and not of failure.

In freeing individuals from the burden of too high taxation, we must not forget the public enterprises which are still in the hands of the state, such as the railways, the coal industry and the National Health Service, about which we have heard so much. I believe that to run those services more efficiently does not necessarily mean, as the Opposition say every day, spending more money. It means better leadership, organisation and management, and, above all, the recruitment of higher calibre men and women. Many of our towns are still dirty, filthy and untidy and surely public works should be carried out by voluntary and by state-controlled labour.

Unfortunately, there is still great waste in several Government Departments and inefficiency in some public services. The Public Accounts Committee, a Select Committee of which I wholeheartedly approve, does a marvelous job in exposing such waste. I suspect the Ministry of Defence's buying policies. As the House is aware, I wholeheartedly support Her Majesty's forces, but the size of the Ministry of Defence and some of its actions, particularly on the commercial side, worry me, and I believe that they leave a lot to be desired.

The country has had so many years of economic failure in the past that we cannot get used to success. Industry must now take off and put the years of defeatism behind it. The answer to exporting depends not so much on the level of the pound sterling but on the research, development, design, production, marketing and sales of the products which customers want to buy. The unions have still to be weaned away from expecting automatic wage increases every year, and must look more to wage levels tied to productivity, which I know the Government are trying to encourage. Above all, there is a vital need for more training in industry and commerce. We have to worry about the flesh and blood, as much as money and fiscal assets. We must worry in the Budget about ordinary Britons, and we must get better value for money from the colossal amount of public expenditure.

The Government's enemies say that the Government are producing a greedy society. I believe that they are not. They are trying to create a more responsible society in which the head of the family will look to himself to look after his family and not, as in the years of the welfare state, to the state. Last year, during the cold weather, we heard about old people who were suffering. I should like to know what their families were doing. We hear about crime being committed by young people. What are their families doing? The state is not the answer to everything. It is often very harmful—[Interruption.] Before I was interrupted by my hon. Friend the Member for Mid-Norfolk (Mr. Ryder), I was about to say, and I am sure that the Whips will agree, that responsibility is the essence of what the Government are doing. Thank goodness the years when people's initiative and conscientiousness were warped by the welfare state are now over. I believe that, as a result of the Budget, we are making a healthier and more responsible society.

6.49 pm

Mr. Roy Hughes (Newport, East)

The late Mr. J. H. Thomas, or Jimmy Thomas as he was more popularly known, was a famous, but rather notorious, son of Newport who, back in 1936, was hounded out of public life, allegedly for leaking Budget secrets. Then there was the late Hugh Dalton, Chancellor of the Exchequer in the post-war Labour Government, who in 1948 was forced to resign because a casual conversation with a journalist immediately before the delivery of his Budget might, it was supposed, have sparked off certain developments on the stock market.

In those days, not only did the Chancellor go into purdah for weeks before his Budget, but there was very little official speculation about the contents of the Budget. Today, things have very much changed, and the process has accelerated during the period of the office of the present Chancellor. For weeks we have been regaled with tales of the vast surplus held by the Chancellor, and the suggestion has repeatedly been made that he intended to dispose of a good deal of it through tax cuts. Much of the speculation would seem to have been officially inspired, a sort of exercise in kite-flying, to see what the reaction of the public would be.

What we all realise now, however, is that this is essentially an unusual Budget, which is not so much about raising taxation as about distributing several billion pounds. Windfall increases have, of course, accrued to the Chancellor: more value added tax than expected, due to increased consumer spending; £2.5 billion more than expected in North sea oil revenues; and the rake-off from the sale of the family silver, which has continued.

The present state of affairs does not point to a healthy economy. We are living in what I would describe essentially as a "candy floss society", for the Government are failing to tackle the real problems that are building up for the future. Superficiality and window dressing seem to be the operative words. For example, in 1979 our manufacturing surplus was £5 billion, but by 1987 we had a deficit of £8 billion. Even when we take into consideration invisible earnings from the City and from tourism, we are left with a £1,679 million deficit on the balance of payments for 1987.

The Chancellor has announced an increase in the tax on petrol. For a start, this will put up the price of just about everything. It would be far better to increase the taxation on spirits. Then there are the cuts in personal taxation, with the basic rate down to 25 per cent. and the top rate reduced to 40 per cent. This latter proposal is simply a disgrace, and this afternoon Opposition Members spontaneously displayed their indignation. Their reaction was perfectly understandable.

With concessions to higher rate taxpayers—and we must remember that the south-east already has the highest spending power — it is people living there who will receive the lion's share of these new handouts. It is another example of the creation of inequality, not only between the south-east and the other regions, but between the haves and the have nots. It is another instance of what Robbie Burns would have described as Man's inhumanity to man, making countless thousands mourn! Cuts in income tax will also mean more consumer spending. I do not wish to be a killjoy, but we must face the fact that a good deal more will be spent on foreign imports, and this is bound to aggravate our deteriorating balance of payments deficit.

Much of the surplus should have been spent on rebuilding British industry. The north-south divide is getting worse. Areas such as Scotland, the north of England and Wales urgently need help to provide the jobs of which they are so desperately short. The amount spent on regional aid, far from being drastically cut, should have been increased to encourage new businesses and new industries to move into those areas to try to iron out the differences between the regions. Tourism is important, but an economy cannot be securely based on service industries. Historic castles linked to Coca-Cola and hamburgers are just not good enough. We need to increase our manufacturing industry by stimulating investment and growth.

Our education system has deteriorated in recent years and is badly under-funded. Teachers' morale is at an all-time low. It is wrong that our children should be penalised by these cuts, for the future is with the young. Our education system should be properly funded.

Perhaps the greatest scandal of all is the rundown of the National Health Service. I support the contention that the health of the people is the highest law. There have been protests all over the country, and in Wales even Her Majesty The Queen Mother felt impelled to intervene over a ward closure in Merthyr Tydfil. A fortnight ago the Conservative-dominated Select Committee on Social Services recommended an extra £1 billion for the National Health Service. The ink was hardly dry on the report before it was rejected by the Government. Since then the Committee has accused the Prime Minister of appearing to misrepresent its recommendations. What a way for a Government to treat their own Back Benchers.

The three presidents of the royal medical colleges have told us that, despite the efforts of doctors, nurses and other hospital staff, patient care is deteriorating and acute hospital services have reached breaking point, but instead of tackling these fundamental problems the Government have been engaged in an exercise in deception. Figures in the White Paper on public expenditure purport to show dramatic increases in spending on hospitals, with current spending up by 26 per cent., it is suggested, since 1982. However, adjustment of the figures to reflect the rise in National Health Service pay and prices shows the increase to be only 0.6 per cent.

The basic question needs to he asked: why all this skimping and saving on essential public services which is so detrimental to the interests of millions of people? The massive accumulated surplus should have been spent on providing the services that people are crying out for. The Chancellor had a clear choice. He could, for example, have supported the National Health Service, reopened wards and provided for the nurses and the low-paid ancillary workers, besides providing better care for the elderly. All the opinion polls have indicated that this is the wish of the majority. Instead, he has opted to give handouts to the better off. This measure, together with the new social security regulations, will mean that the poor are poorer and the rich richer. In that sense, the Chancellor has failed the nation. When people come to consider more soberly what he has said today, they will realise that what they voted for at the last general election is highly detrimental to their own long-term interests.