HC Deb 10 March 1992 vol 205 cc762-822

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. Norman Lamont.]

[Relevant document: European Community Document No. 10212/91 and COR2, the Commission's Annual Economic Report 1991–92.]

4.42 pm
Mr. Neil Kinnock (Islwyn)

First, I offer the traditional congratulations to the Chancellor of the Exchequer on the delivery of his speech, especially since he had a lot of information to offer and took rather longer providing it than he did last year and than has been customary in recent years. Nevertheless, we listened with interest. Indeed, I offer my congratulations with rather greater felicity than I usually do because this will be the last speech by a Conservative Chancellor for many years to come.

I also want to follow an even more pleasant tradition and welcome several of the measures that the Chancellor announced this afternoon. The step that he made in the direction of radical reform of the Budget process is certainly worth a warm welcome. It has been the policy of our party for some years past, and it is good that there is a consensus. The job of the right hon. Member for Huntingdon (Mr. Major) will be made easier next year when he speaks from my current position after the change has taken place.

We should also like to welcome several of the changes that the Chancellor is introducing in respect of businesses, large and small. I refer to changes in the VAT arrangements for small businesses and the effective freezing of the uniform business rate—and to other arrangements to do with the inflation rate. We are bound to wonder, as we opposed the introduction of the UBR in the first place, why the Government waited until the recession had continued for 21 months instead of making earlier changes which would have saved many good businesses. The UBR is lingering evidence of the shambles of the poll tax system, and any changes in the right direction are to be welcomed—before we make the further changes that will be welcomed by business during the rest of this year, when we introduce our reforms.

For the automobile manufacturing industry, which has been under terrible pressure, especially during the recession—and still—the changes in the special car tax must be welcome. The Chancellor has made here another worthwhile step worthy of our support.

We also support the modest but welcome steps that he has taken in respect of the British film industry. I had hoped last year that he would take up the proposals of the working party; I am glad to see that he has rectified that this year. As the right hon. Gentleman is making large changes to the business expansion scheme this might have been an opportunity for him to make the scheme serve the interests of the film industry, which certainly needs support and which, given its remarkable record again last year, is worthy of that support.

We are in the midst of the longest recession since the 1930s, with unemployment rising towards 2.75 million again, with record repossessions and bankruptcies. What our country needed today—

Mr. Tim Smith (Beaconsfield)

Will the right hon. Gentleman—[HoN. MEMBERS: "Sit down!"]

Mr. Kinnock

What our country needed today was a Budget for strengthening Britain and promoting sustainable recovery out of the recession caused by the Government. What we got was a Budget to try to bribe voters with borrowed money which they will have to repay. The borrowing that the Government are raising to finance tax cuts is not, as the Chancellor would insist, prudent economic strategy: it is a panic-stricken pre-election political sweetener.

For the sake of a few weeks of an election campaign the Government are going to try to saddle the British electors and taxpayers with many years of debt. The borrowing —[Laughter.] When Conservative Members realise that the Government are running a public sector borrowing requirement of £28 billion perhaps they will be a little more silent on the subject—the more so since the PSBR is the result of a combination of long-term failure and recession and short-term fear in the face of the electorate.

The kind of borrowing that the Government propose—the extra borrowing to fund tax cuts—will not provide a single extra school or hospital. It will not provide a single extra place on a training scheme or in a childcare nursery. It will not create a single extra research project or transport improvement, or put an extra policeman on the streets. This debt is just extra Tory dead-weight debt, an extra £2 billion which gives a new meaning to the idea of state funding for political parties.

There are no excuses for this Government. In 13 years of power they have had £100 billion worth of oil revenues, £40 billion worth of income from privatisation and the revenues from the highest tax burden ever imposed on the British people by any Government. At the end of all that, the best that the Chancellor could come here today and forecast in his Budget statement was a paltry 1 per cent. growth, further rises in unemployment, a continuing balance of payments deficit, despite the recession, and a PSBR of £28 billion. That is double this year's PSBR, which the Chancellor acknowledged to be £14 billion. What a terrible confession—

Mr. Tim Smith

Will the right hon. Gentleman give way?

Mr. Kinnock

What a terrible confession the Chancellor had to make to the effects of a mismanagement that has brought this country to the point where the Government have got those finances and that growth into such a parlous state. Even now, it is quite probable that the Chancellor is not making a dependable forecast. He is having one of his visions of green shoots all over again. He started having his attack of green shoots—his equivalent of pink elephants—last year in his Budget speech. He started promising then the recovery will begin around the middle of the year"— that is, in 1991. He told us that output would increase by about 2 per cent."—[Official Report, 19 March 1991; Vol. 188, c. 165.] He firmly anticipated "an added boost" in the "revival" in "consumer confidence". He said that the Budget deficit would be £8 billion. In reality, as the country knows to its cost, output did not grow by 2 per cent.—it fell. The promised revival in confidence and performance simply did not take place and the deficit was not £8 billion but, as the Chancellor has just told us, £14 billion—75 per cent. higher than his original forecast. The Chancellor's predictions were not simply inaccurate; they turned out to be complete fiction.

The Chancellor has told the Select Committee that forecasting is an inexact science and it may be that he is a hapless victim of the forecasters—innocent putty in their hands. He is, after all, only the Chancellor of the Exchequer. In that case, we have to ask him what weight we can attach to the forecasts that he has been offering us this year, especially that on the PSBR.

We also have to ask the Chancellor, if the forecasters were inexact and he was consequently in error and knew by January of this year that he was wrong, how could he still say to the January meeting of the National Economic Development Council: The policy would not have been different had we known the outcome"? People all over the country have lost jobs, businesses and homes. What faith can any of them have in a Chancellor of the Exchequer who says that, even had he known at the outset that this was going to become the longest recession, his policy would not have been different"? Despite all the redundancies, the bankruptcies and repossessions, he still, as he put it himself, regarded unemployment and recession as a "price well worth paying". The Chancellor was sticking to his economic guns even when they were turned on the people of this country.

In his last Budget statement, the Chancellor told us that he was dedicated to a simple rule, which … requires the Government to finance their spending honestly."—[Official Report, 19 March 1991; Vol. 188, c. 167.] When I heard the Chancellor laying down his simple rule, I was reminded of one of his predecessors. I recall the Chancellor who was excoriating "successive Governments" who, he said, had spent more than they were prepared to raise honestly from taxation and … made up the shortfall by borrowing. They left that bill to be picked up by future generations." —[Official Report, 20 March 1990; Vol. 169, c. 1016.] It was a stern rebuke to those dishonest borrowers and, interestingly, it did not come from a Chancellor in the distant past, not from a Victorian or even from one of the advisers to Henry VII; it came from the last Chancellor, the right hon. Member for Huntingdon, now the Prime Minister, just two years ago in his Budget statement.

When I compare those words about honest taxation and borrowing with the Budget we have just heard, a Budget in which the Government will borrow £28 billion, of which £2 billion will go for tax cuts, I realise that I do not have to condemn the Government—they are condemned out of their own mouth and on the basis of their own words. They are the dishonest borrowers whom their Prime Minister was so busy denouncing. It is not just the Prime Minister and the Chancellor who have cursed Governments for spending more than they were prepared to raise honestly from taxation.

The Chief Secretary to the Treasury (Mr. David Mellor)

Will the right hon. Gentleman give way?

Mr. Kinnock

It is an exception to do so, but by all means.

Mr. Mellor

Will the right hon. Gentleman—[Interruption.]

Mr. Deputy Speaker (Mr. Harold Walker)

Order. Have hon. Gentlemen started the election early? As I understood it, the Leader of the Opposition had given way.

Mr. Kinnock

indicated assent.

Mr. Mellor

I am grateful to the right hon. Gentleman for giving way. Are we to take it that he intends to oppose the 20p tax band that the Chancellor has just announced?

Mr. Kinnock

It must have been the word "dishonest" that brought the right hon. Gentleman to his feet.

Mr. Mellor

Answer the question.

Mr. Kinnock

I will if the right hon. Gentleman will just shut up. I will answer it, no problem. We shall, next week, be offering our alternative Budget. The country will see in that how we shall have a much better offer to make to the taxpayers of Britain and to the people of Britain, who, in the great majority, want jobs, decent public services, a health service, an education system and not the bribes that the Government are offering them. [Interruption.]

Mr. Deputy Speaker

Order. The Chancellor was given a reasonable hearing and the Leader of the Opposition is entitled to no less. I very much hope that we shall not get into red card territory.

Mr. Kinnock

Thank you, Mr. Deputy Speaker.

The right hon. Gentleman and I just made a little history there because, as far as I know, it is the first time that the Leader of the Opposition has been interrupted in the course of his response to the Budget statement. What a shame, now that we have established this precedent, that we shall be changing the Budget process, so possibly the same conditions will not arise again. However, I can say on behalf of my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) that if the then Leader of the Opposition wants to intervene, he will give way.

Mr. Mellor

Answer the question.

Mr. Kinnock

I have just given the answer.

We have been treated for months with teases about the Budget. We have been treated to the sight of the Chancellor of the Exchequer and other members of the Treasury team saying that they could not disclose anything. I think that, in the name of reasonability, they could at least give us another six days to produce our own statement in opposition to, an alternative to, what we have heard this afternoon.

It has not just been the Chancellor and the Prime Minister who have been cursing Governments for spending more than they were prepared to raise honestly from taxation",—[Official Report 20 March 1990; Vol. 169, c. 1016.] It is only weeks since the chairman of the Conservative party called borrowing "deferred taxation". The right hon. Gentleman probably regrets that now. He and the rest of his colleagues have to go into a general election with a promise to make tax cuts that are funded by borrowing, and that means that they will have to go into that general election campaign guaranteeing that they will make their children and everyone else's children pay the cost of their electioneering. But it is worse than that, because borrowing for tax cuts for this generation leaves the next generation with debts and nothing else.

Borrowing for tax cuts does not provide the next generation with the means of generating wealth or with any extra ways of producing revenues to repay the borrowing. Borrowing for tax cuts leaves no extra advantages, only extra burdens. The difference between borrowing for investment in the future and borrowing for immediate consumption is the difference between borrowing to put an extension on one's house and borrowing to go away for a day at the races. That is what the Government aim to do, just a few weeks at the races before they come second.

Perhaps the Chancellor will tell us whether he thinks that it is all right to compromise our children's future and to burden rising generations with the cost of our generation's tax cuts because he believes that the reduction in taxes now is the best way to stimulate the economy into recovery. If he believes that, the Chancellor is wrong—even about that. The burden of personal and company debt in Britain is so big that some of the borrowed giveaway would doubtless be used to reduce that record burden and not to generate fresh economic activity.

Mr. Tim Smith


Mr. Kinnock

Such is the run-down in British industry that, as the Engineering Employers Federation and several others testify, much of the borrowed giveaway would be spent on imports and not on generating jobs in Britain. The Government know that, but they still borrow for tax cuts in an economy which, despite the long recession, has a rising balance of payments deficit as the Chancellor again confirmed in his speech. In making those changes the Government demonstrate their desperation and their irresponsibility.

If the Chancellor believes that borrowing for tax cuts is an effective way to promote recovery, he has to answer a simple question. If borrowing for tax cuts is the fast lane to recovery, why did not he hit upon this great scheme last year or a year ago when the recession was already nine months old instead of waiting until the recession was 21 months old? Why did not he do it a year ago when he was forecasting that Government borrowing would be just £8 billion instead of £28 billion? Why did not he do it when 50,000 more companies were still in existence or a year ago when 100,000 more families were still in their homes? Most of all, why did not the Chancellor do it a year ago when 800,000 more people were still in their jobs?

The answer is obvious. The Chancellor did not take any action to combat recession because there was no election to come just weeks after the Budget. Now the election looms and borrowing, yesterday's original sin, has become today's prudent virtue. However, the debt will still have to be paid. Perhaps the Chancellor wishes to avoid burdening the next generation with the cost of money that has been borrowed for these pre-election tax cuts. That would be noble of him but, of course, there is only one way for him to stop the obligation falling on the next generation, and it would be quickly to reclaim the cost of this year's borrowing by raising taxes on the present generation. Obviously, that would mean that what he gave with one hand this year he would have to take back with both hands next year.

If the debt that the Chancellor has run up for tax cuts was not to be permanent, he would have to repay it with higher and wider VAT and other taxes and charges. I heard what the Chancellor said about having no plans to make changes in VAT. It was a faithful echo of what his right hon. and learned Friend the Member for Surrey, East (Sir. G. Howe) used to say in those precise words before the Government doubled VAT at the beginning of their period of government.

The Chancellor knows that this is the only alternative to saddling rising generations with tax. The Prime Minister also knows it. All that they have not done is to admit it. I shall give the Chancellor an opportunity to make his Budget a little more honest. First, I ask him to acknowledge the basic truth that money borrowed for tax cutting would soon have to be repaid by tax raising if he was to keep his pledge to balance the Budget over the cycle. That must be the case. The Chancellor shakes his head. Unless he has developed a new system of mathematics, what I have said must be the case. One way or another that money will have to be repaid.

Secondly, I ask him whether he would do that in this generation or leave the unavoidable task of repayment to the next generation. Which is it to be—extra tax for our children or extra tax for us? I know that the Chancellor could tell us now if he wanted to. He must have worked it out. If he can give an honest answer so that the country will hear about the real cost of his Budget and who will pay that cost, he should rise and tell us. It should not be difficult because all that he has to do is to repeat the recent words of the Prime Minister who said: if borrowing takes the strain,"— which it clearly is— taxes … have to go up to service the debt". If there is not an acknowledgement of that, so much for the "simple rule" of honest financing and for the Prime Minister's declarations about honest taxation and borrowing. So much for this discredited Government.

Borrowing money for tax cuts in this recession will not stimulate recovery in any significant or sustained way. It will not strengthen the economy or improve the essential public services. If the borrowed money goes into consumption, it will suck in imports and increase the deficit and debt, and bring a rise in inflation which will be combated in due course by higher interest rates, so pushing the economy back into recession. That is where Tory policies have led this country already, and that is why the British people do not want to rejoin the treadmill that they have twice been on in the past 13 years.

The British people know that in this recession, if there is to be borrowed money available, it must be invested in industry, construction, capital works, transport and other essential services. People know that if borrowing is used in that way it will generate sustained orders, production, profits and employment in Britain. It will create wealth and incomes by building a recovery with staying power. It will generate the extra revenue that will be needed in future for rising standards of health provision, education opportunities, childcare and proper security for the old.

That is the kind of resilient recovery that Britain wants and needs. The Government have never been able to produce a resilient recovery because they have always relied on the consumption-led recovery that the Chancellor advocated yet again in his speech. We need an investment-led recovery that will make Britain well equipped, well trained, competitive, consistently successful and socially just. That change will never come from this Government. They have got it wrong for the past 13 years and they will not start to get it right now. They have had all that time in power and at the end of it, it is a matter of fact that our country is under-trained, under-invested and under-performing.

Because of the Government's policies, Britain is increasingly dependent on imports and is still in recession. Our essential public services are run down, and poverty is spreading across the land. Now the Government are asking the country to believe that, having got it so wrong for so long, they can with this Budget put it all right. They cannot be believed: they are not believed. That is why they will be beaten. They are hollow men—and the Tory Government ends not with a recovery bang but with a bribery whimper. The British people will not be deceived. They want real recovery. They will not support the bribers; they will support the builders.

5.10 pm
Mr. Peter Bottomley (Eltham)

The speech of the Leader of the Opposition showed his attitude clearly. We have heard that there is to be a £30 billion programme of public capital spending—a larger sum than the public sector borrowing requirement—yet there was no account of that in his speech.

The right hon. Gentleman was asked what he would do about the 20p in the pound tax rate for the lower paid. He ducked the question and was asked it again, and again he ducked it. It is my guess that by the time that he reaches a press conference he will have been able to take advice from his right hon. and learned Friend the Member for Monklands, East (Mr. Smith) or from other right hon. and hon. Friends. They will explain to him that he has to say either that the Labour party will vote against 20p in the pound or that it will support the reduction.

The right hon. Gentleman will not be able to get away with his tight response when replying to the Budget statement on behalf of the Opposition. It was seen to be inadequate and it disappointed his supporters. The reaction of Opposition Members at the conclusion of his speech showed that he is not up to the job of moving across the Chamber to the Government Benches.

Mr. Tony Marlow (Northampton, North)

Does my hon. Friend agree that, to put it in a phrase, the Leader of the Opposition has been kebabed by the Budget?

Mr. Bottomley

I am not sure about that. One needs to be fair to him. He did not have much time to prepare his response to the contents of the Budget. He had to work on the assumptions that appeared in the newspapers. It is wrong to spend too much time criticising the right hon. Gentleman, because he has done a great deal with the Labour party during his time as Leader of the Opposition. It is plain, however, that there is likely to be a change of some sort on the Opposition Benches after the election. As the election has not yet been announced, perhaps we can leave that to the debate that will take place later this week.

There will be a welcome throughout the country for many of the imaginative proposals that my right hon. Friend the Chancellor of the Exchequer announced. The idea of using the rate of 20p in the pound for the first £2,000 of taxable income is imaginative and will be welcomed. If it did not lead to a reduction in the basic rate of tax, it would be wrong. The introduction of the proposal as a stepping stone towards a reduction in the overall rate is to be welcomed.

Many people will understand that, whatever we may or may not want to do to those higher rates of tax, there are many others who are in and out of work. That is the reality, and it can be a tragedy for them. When someone in that position finds work and income, but is then subject to income tax of 25p in the pound plus national insurance stoppages, those are disincentives. It leads also to difficulties in the eventual merging of the tax and benefits system.

I recommend that both major parties in time adopt the idea of putting the social security system within an extended arm of the Treasury, so that on one side the Inland Revenue reports to the Treasury while on the other the social security system reports to it. That would enable the Chancellor of the Exchequer to decide how the tax and benefit systems can begin to come together, to overlap and eventually to merge. I do not think that it will be possible to merge them in one operation.

One of the innovations of the past two or three years which has not really been noticed is that child benefit changes are now announced by the Chancellor of the Exchequer. Introducing child benefit was a proper move but mistakes have been made. The first mistake is to use the term "child benefit", which suggests that the benefit is selective and is taken up only by the poorest. All hon. Members know that child benefit gives no help to those on income support because it is taken into account in assessing their income. That is proper, but to retain the term "child benefit" is a mistake.

I hope that in time that benefit will be called the child cash allowance. It is right that it should be paid in cash and it is right that it should go to all children. It should be recognised that the present Chancellor has been right—as was my right hon. Friend the Prime Minister before him—with the support of my right hon. Friend the Secretary of State for Social Security, to make the necessary decisions as part of a Budget announcement. I hope that in future Budgets it will be possible to have real increases in child benefit, or the child cash allowance, as well as to extend the 20p rate of income tax beyond the first £2,000 of taxable income.

Mr. John Battle (Leeds, West)

Is it not a fact that the consequences of the measures that have been announced today will not work through into the pockets of the lower paid? Anything that they gain will be deducted from their family credit. The Government have put together social security benefits and taxation. The hon. Gentleman will see that it is not a Budget for the low-paid or lower-paid.

Mr. Bottomley

I hope that this portion of my speech will not be extended too far. I am trying to make some non-partisan points. If my support of higher rates of child benefit is partisan and the Labour party disapproves of it, that is something that should be on the record. I was working on the assumption that Labour party policy towards a child cash allowance had not changed.

I thought that it was not controversial to talk about stepping stones leading to the merger of the tax and social security systems. I accept the argument of the hon. Member for Leeds, West (Mr. Battle) that families in work, but on low incomes, who have children will not get an immediate increase.

Mr. Battle

They will not get a penny.

Mr. Bottomley

When the hon. Gentleman has finished interrupting me from a sedentary position, I shall take up his argument. There are also those families without children who will receive benefit.

The proposals of my right hon. Friend the Chancellor for pensioners will provide them with immediate help. They will be recognised as important and they will do more in a concentrated way for 5 million pensioners than would have been done under the Labour party's proposals, which would have given an increase in pensions to pensioners whether or not they were well-off.

A degree of selectivity is worth while. Indeed, there must be a degree of selectivity. It may be based on income. There may be a condition—for example, whether or not one is dealing with a child. I think that my right hon. Friend deserves congratulations for employing selectivity for pensioners based on income.

I look forward to the debate continuing over the next two or three days—

Mr. D. N. Campbell-Savours (Workington)

Will the hon. Gentleman give way?

Mr. Bottomley

I shall not give way.

If the debate is truncated because we are to move into a general election campaign, it will be interesting to see whether the official Opposition's leadership will make up its mind about 20p in the pound for the first £2,000 of taxable income or whether it will try to duck that and other crucial issues.

5.16 pm
Sir David Steel (Tweeddale, Ettrick and Lauderdale)

It is not my normal practice to intervene in Budget debates. I hope that my hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith) will be able to catch your eye tomorrow, Mr. Deputy Speaker.

In the absence of the leader of my party, my right hon. Friend the Member for Yeovil (Mr. Ashdown), because of the effect of Glasgow weather on his health, I shall begin by saying that when I last had a cold my doctor, who is also a friend, came through the bedroom door bearing a bottle of whisky, a jar of his own honey and a lemon. He said, "You add these to hot water and you will feel much better." I said, "This is the national health service at its best, but will it cure me?" He replied, "No, it won't do you any good at all but it will make you feel better." And this is a hot toddy Budget. It will not do the economy any good but it will make people feel better temporarily, for as long as the infusion lasts. I believe that that is what it was designed to do.

The Budget was designed not to help the country over the months or years ahead but to get the Government through the next few weeks as they hope. The real question is whether the Budget in these terms would have been introduced by the Government after an election in precisely the same terms in which it has been introduced this afternoon. The answer is manifestly not.

We unreservedly welcome some of the individual tinkering changes. There is relief on business rates; arrangements for value-added tax and late payments, which will help small businesses; inheritance tax changes for family businesses—they are welcome, and especially for family farms—relief for the car industry; and the increase in income support levels. These minor changes would, I hope, have been carried out by whatever Government were in office and at whatever stage in parliamentary terms.

Our basic complaint is that the Budget's fundamental strategy is wrong. It will do nothing to stimulate the investment that the country requires. In the middle of his statement, the Chancellor of the Exchequer produced a curious little homily about the difference between public investment and private investment. The right hon. Gentleman more or less said that all public investment was somehow bad and that private investment was good. It was—[Interruption.] That was the general tenor of his remarks. We say that such is the long-term damage that has been done to our economy that we need the stimulus which can be achieved only by the public sector if we are to turn the economy round.

My hon. Friend the Member for Berwick-upon-Tweed put the matter well in his pre-Budget submission when he said: Most economies were not as badly managed as Britain's was during the late 1980s, and few of our main competitors have Britain's underlying weaknesses of a poorly-skilled and educated workforce, an inadequate transport infrastructure and a poor record of investment in research and development. That is why we have suggested that a programme should be brought forward which would include school and college building; energy conservation measures—how little there was in the Budget on the improvement of the environment and energy conservation; a tiny fiddling around on the margins on unleaded petrol and that was all, nothing else—major investment in railway infrastructure and, in particular, in housing because Britain is suffering from an increase in homelessness. It is one of the standing condemnations of the Government that, having introduced an excellent programme of council house sales, they have not allowed local authorities the freedom to spend the income derived from that on housing.

To give a brief example from my constituency, I had to take a deputation to see a Scottish Office Minister the other day because one of my housing authorities is unable to proceed with a programme to improve the housing stock in my constituency, including improvements such as double glazing, which surely the country should welcome; colour-washing to improve the environment of some of our rather dowdy housing schemes; internal improvements and the construction of new homes, which are needed because the waiting list in my area has risen by 37 per cent. in one year.

The key point is that, while the Government are restraining local authorities from carrying out such sensible programmes, 10 per cent. of the labour force in my area is in the construction industry which is suffering chronic unemployment.

Our alternative proposals to the Government's Budget strategy would result in a 400,000 drop in unemployment in the first year and a 600,000 drop in the second year. As each unemployed person costs the Exchequer £8,500 today, we are talking about a consequential saving to the Exchequer of £2.5 billion by the end of the second year. In all the waste of public expenditure there is no greater waste than the money spent on the growth of unemployment benefits that are paid out under the Government.

The Government are aiming for a snapshot election. What the country will want to look at is not the record over 13 days but the record over 13 years. They will look at the record unemployment, the unprecedented number of home repossessions, the unprecedented level of debt in our society, the record homelessness, the growth of the cardboard cities and, in particular, the squeeze on young people whether through the reductions in social security or in education assistance. When the Government are judged on 13 years as distinct from 13 days in the aftermath of a Budget, they will be found by the country to be severely wanting.

5.22 pm
Sir John Stokes (Halesowen and Stourbridge)

There has been a certain air of unreality in this afternoon's Budget debate in that most people know that a two point cut in interest rates would do more than anything else to revive the economy, but we know that that cannot be done because of German control. As an Englishman, it grieves me that we have handed over control of our economic and monetary affairs to a foreign bank. That is a non-party point, as the Opposition are even more keen on the exchange rate mechanism than are Conservative Members. I fear that the ghost of an independent bank rate decided by ourselves alone in these islands will haunt this country and its people for many years to come.

That, of course, is not my right hon. Friend the Chancellor's fault. I congratulate him on what he has done. I expect to see clarity of purpose and execution coming from this Budget—as I am sure we shall—with its principle of low taxes, protection of private property under the law, limited state intervention in social and economic affairs, emphasis on non-state institutions such as the Church and the family and rejection of bureaucratic attempts to centralise and standardise. I object to the state telling me what to do in any aspect of life where an individual should have free choice according to his conscience. I am glad, therefore, that my right hon. Friend the Chancellor has not made punitive increases in the taxation of tobacco and alcohol.

Looking at the country at large, and my constituency in particular, those in work have never been better off. With low inflation and average pay rises of 7 per cent., their standard of living has continued to rise. All that would be put at risk by a Labour Government. What is needed now is to help industry and commerce to recover as much as possible and to give individuals more confidence about their future, including those who, unfortunately, have become unemployed.

Looking back over previous years, I wish that we had been able to cut taxes by a larger amount, even if that meant paying less back in borrowing. I hope that we can still find a way to make local government more accountable to its electorate in terms of spending, which was the merit of the original community charge. I am also concerned about the increasing numbers in the exceedingly popular national health service, which is good and getting better. But we must watch the numbers. I think that I am right in saying that, with the disintegration of the Soviet army, the national health service is now the largest organisation in Europe. If its staff continues to increase at the present rate, in due course half the British people will be employed in the health service. Therefore, we must be careful, as I am sure the Government are, to ensure that we get full value for all money that is spent.

I welcome enormously the reduction in the business rate and the increase in VAT thresholds, as the contribution that small firms make to the economy is immense. As a Member from the west midlands, I am delighted that the tax on new cars is to be reduced. That will be greatly welcomed in my constituency and elsewhere. The reduction in inheritance tax on small businesses and farms is splendid. One hopes that those reductions will continue in the years to come with future Conservative Governments.

I welcome the lower band in income tax which has long been needed. That will help those who are in and out of work and who find life difficult. It is a splendid measure which I am glad the Government have introduced. Altogether, the tax cuts will stimulate investment and the economy and enhance confidence at consumer level. We must continue to help people to be more self-reliant and to provide more and more for their education, health and retirement.

It is vital that the Government and the Chancellor should be committed to minimising Government intervention in favour of the free market and individual choice. That is the essential difference between the Conservative and the Labour parties. We must also make it clear that we commend a Conservative Government who know what they want to do, who are confident that they can do it and who will have the chance to do it, too. My right hon. Friend the Chancellor has shown confidence and competence and for that reason the Government deserve to win the next election.

I have two personal sadnesses which arise not from the Budget but from the way in which we spend or save our money. The cuts in the Army, in the armoured regiments and the infantry battalions, will prove to be a dangerous and false economy and I hope that the Government will reconsider them in a few weeks' time. I am also concerned about the headlong rush to enable more young people to go to university. More students may mean a lower standard. There are better ways of bringing on our young people than by making them mad to get a degree in all kinds of absurd subjects.

Finally, a Conservative Government must protect and defend the institutions for which Britain is so renowned—the Queen, Parliament and especially the House of Lords with its hereditary element, the Church of England, the judges, the armed services and the police.

I hope that we can emerge from this long recession, which is world wide, with more confidence. I hope that we can show that we have the will and the purpose to make our country great again, so that we can be an example to other nations, particularly on the continent, which so badly need a lead from us.

This may be the last speech that I shall make in the Chamber. I want to say how very much I have enjoyed being here. What a privilege it has been to represent my constituents and to stand up for all that is best in our country at home and abroad. I thank Mr. Speaker for his unfailing courtesy to me and everyone on both sides of the House for their kindness and companionship, which I shall never forget.

5.30 pm
Mr. Roy Hughes (Newport, East)

It is a pleasure to follow the hon. Member for Halesowen and Stourbridge (Sir J. Stokes). We shall miss him very much in the new Parliament. He invariably claims to speak for England, so he will understand it if I say a few words in favour of Wales.

It would not be unduly prejudiced to suggest that the Budget is being used by the Government to try to win the forthcoming general election. After 13 years of their rule, Britain is in the worst depression since the 1930s. A desperate attempt is being made to save the skins of Conservative Members and to keep the Government in office. I believe that they will not succeed.

I shall consider some of the proposals put forward by the Chancellor this afternoon. I say "proposals" because the real Budget will be brought forward after the general election by my right hon. and learned Friend the Member for Monklands, East (Mr. Smith).

Earlier, there was much speculation about a reduction in the basic rate of income tax. The Chancellor has approached that proposal in a round-about way and under the guise of helping the lower paid. It goes without saying that we would all like to pay less tax. Nevertheless, many people realise that the amount involved would be better spent elsewhere. Income tax cuts will invariably suck in imports. In addition, the Government's proposals, including the reduction in income tax, will mean that they have to borrow to pay for them.

Those tactics are completely contrary to the previously declared attitude of the Prime Minister. On 22 February 1990, he said: For decades, successive Governments had spent more than they were prepared to raise honestly from taxation and they made up the shortfall by borrowing. They left the bill to be picked up by future generations. No further comment is needed from me, but certainly we shall hear much about the Prime Minister's earlier attitude in the forthcoming general election campaign.

Mr. Peter Bottomley

Has the hon. Gentleman seen the recent written answer in Hansard which shows the public sector borrowing requirement for each year since 1974 in real terms and adjusted for inflation? It shows the figures for 1974–75 and 1975–76 and so on, and compares them with those for the past five years. There has been no net PSBR since 1984. That puts the words of the Leader of the Opposition into perspective.

Mr. Hughes

I could have cited other quotations to reveal the Prime Minister's earlier attitude and the fact that the Budget proposals are a complete contradiction of it.

The cuts in tax which have been announced will not help the unemployed of whom there are no fewer than 2,600,000—the total is continually rising. The tax cuts will not help the homeless. What is needed is a boost for housing. The capital receipts held by local authorities from the sale of council houses should be released on a phased basis. Besides giving ordinary people the homes that they need, such a measure would provide badly needed employment to the construction industry. The cuts will not help people on hospital waiting lists or reduce exorbitant prescription charges. They will not help children in inadequate schools, which have no text books. The Chancellor is borrowing to bribe. As my right hon. Friend the Leader of the Opposition clearly pointed out, that can only mean future tax increases. The Opposition believe that the reversal of Britain's economic decline and the elimination of social squalor are the main priorities.

I want to be fair to the Chancellor about the reduction of the special car tax. I agree with that reduction and I am glad to note that my right hon. Friend the Leader of the Opposition also agreed. I am sympathetic to that proposal because it is justified. The car industry is vital to the economy. It has taken some bad knocks recently. Sales have plummeted, output has been cut and workers have been laid off.

The ripples from the car industry go far and wide in Wales. We do not have a car assembly plant, but we are very reliant on car component industries for employment. For example, we have an important Ford car engine plant at Bridgend and another Ford plant at Swansea. Bosch—the major German company—is now well-established in the vale of Glamorgan and employs hundreds of people. Lucas Girling, the brake manufacturer, is a major employer in Gwent. There are many other examples.

More importantly, the steel industry in Wales relies greatly on the motor industry to take up much of its output. In employment terms alone, the car industry is vital and we ill-treat it at our peril. That is borne out by Germany and Japan, which have encouraged and fostered their car industries. They are the two most successful trading nations.

I know that we are all green now. It is one thing to prevail on our motor manufacturers to step up research to curb the effects of fuel emissions. However, we should bear in mind that ordinary people are attached to their motor cars. Private transport was once the prerogative of the rich. Now people use their cars to travel to work, many housewives find them indispensable for shopping at the local supermarket and many families find their cars indispensable for leisure purposes. We should step up investment in rail and other forms of public transport, but we should realise how reliant we are on road transport. No magic wand can be waved to change the position overnight.

Training provision is also important. As far as I am aware, the Chancellor made no mention of that vital subject. Surely the disastrous cuts made in the training budget in 1991 and 1992 should be restored. What sense was there in cutting training in a period of heavy unemployment? I believe that we should increase the number of training opportunities for the long-term unemployed, and give all young people a guaranteed entitlement to quality training. That would constitute real investment in Britain's future prosperity.

Then there is the matter of help for small businesses. Here again, I support my right hon. Friend the Leader of the Opposition, who welcomed the proposals concerned. Of course small businesses need help—but that help is long overdue. Only yesterday, I received a telephone call from a constituent whose husband was in a small-business partnership. The company had run into difficulties, and a leading firm of merchant bankers—in pursuit of its pound of flesh, so to speak—is threatening to take over the family home. That personal tragedy is only one example of what is currently happening.

Essentially, the current recession is a product of the Government's own policies. When he was Chancellor, the right hon. Member for Blaby (Mr. Lawson) allowed a free-for-all, with easy money and easy credit; now, we are reaping the whirlwind. The Prime Minister and the Chancellor are apparently on record as saying that unemployment is "a price worth paying". I certainly do not agree with that contention, or with their attempt to blame the so-called world recession for our current troubles. Comparisons are said to be odious, but let us take Japan. It was said that Japan was in recession in 1991. Some recession! In that year, its output grew by 4 per cent., while ours fell by 4 per cent.

This is the Chancellor's second Budget. He is not a Welshman, and it is extremely unlikely that he will have a third try. Today is his date with destiny. If things go wrong on 9 April, he will book himself a one-way ticket to the pet-food canneries at Melton Mowbray; how can he escape the dogs and the tin opener? Let me make it clear that that inelegant language is not my own. It is taken from the authentic voice of the Conservative party—last Friday's Daily Telegraph. On page 19, Christopher Fildes went on to point out that, in the Tory party, the pack instinct … is one of its nastiest qualities". I am sure that the right hon. Member for Finchley (Mrs. Thatcher) would bear out that observation.

There is little doubt that the Chancellor's head is on the block. Let us be fair: he has faced a difficult task, given that more than 2.6 million of the working population are unemployed, the figure has risen consistently over the past 22 months and the trend is likely to continue unabated. Bankruptcies are at a record level, with 200 businesses going bankrupt every day. Home repossessions and mortgage arrears are also at record levels: there were 75,000 repossessions in 1991, with all the misery and unhappiness that that involves.

After 13 years of the present Government, business confidence is at an all-time low. Leading Government figures, such as the Secretary of State for the Environment and the Chief Secretary to the Treasury, have tried to cover up the catalogue of disaster with bluster coupled with music-hall humour. I can only say that that is not going to work. The game is up; "you can fool some of the people some of the time …" Conservative Members will know the rest of the quotation. I believe that, on 9 April, the people of Britain will elect a Labour Government.

5.45 pm
Mr. Richard Page (Hertfordshire, South-West)

I well recall the speculation that heralded today's Budget and, as I look across at Opposition Members, I see them knee-deep in shot foxes. I ask them to remember what we are going to do for pensioners by means of income support and what we will do for people on lower incomes by introducing a 20 per cent. band for the first £2,000 of taxable income. That is a significant move on the Conservatives' part: the party is recognising the poorer members of society, and giving them some help in a particularly difficult time. [Interruption.] I used to represent Workington, one of the tougher parts of the country. I have observed the improvements that have been made there and, over the past 12 years, I have observed a general increase in standards of living throughout the country.

One of the attractions of speaking on the first day of the Budget debate is the ability to make comments that are unsullied by any outside views or pressures—in particular, to make comments before the combined wit and wisdom of the press have been brought to bear. Many people outside the House do not realise that the press operates as a series of wolf packs: the Sundays prowl the corridors, desperately trying to keep stories from the dailies in case they are filched from them before their publication date, while the dailies compete with each other, exchanging titbits of news and information. Thus, when the papers hit the stand, we see an underlying similarity between them.

Bereft of the combined wit and wisdom of the scribes of Fleet street, I am nevertheless convinced that their judgments on the Budget will prove that it is to be deemed one of the most ingenious, caring and clever Budgets produced for many a long year.

I shall not develop any of the points that have been made about help for pensioners and for those who will benefit from the 20 per cent. tax band. Those points have already been made and I am convinced that, as the days go by, other hon. Members will trawl over the same ground. Let me simply make one brief comment: even if we had knocked one penny from the basic rate of income tax, we could have acted with integrity and honesty. That would not have been an election bribe. Over 12 years, we have consistently lowered the basic rate: from 33p in the pound to 25p, and we aim to bring it down to 20p. That is a committed aim and, if the Chancellor had felt that that was the way in which to act, it could have been done with integrity.

Let us suppose that the roles had been reversed, and that Opposition Members had been involved, with their commitment to higher taxation and increased centralisation. In that event, such action would have been deemed to be an electoral bribe, but that does not apply to the Conservatives, because we are committed to bringing down the tax rates. I hope that that will be a continual programme, followed over the next four to five years of Conservative government.

Last year, I talked about small businesses. Then, my right hon. Friend the Chancellor devoted a substantial part of his Budget to helping them and I am delighted that he has listened further to the calls of those interested in small businesses and has brought together a series of measures that will give them even more help and support.

Let us consider in particular what my right hon. Friend the Chancellor has done with the uniform business rate. For me to be able to tell the small businesses in my constituency that the increase will be limited to the rate of inflation will be an enormous benefit to them. There is no doubt that in the south we have suffered an increase in the UBR to subsidise businesses in the north. I do not object to that because I want to see an equal spread of wealth across the country, but it has been a blow in a time of difficulty, and the fact that any increase is to be held to the rate of inflation is to be commended.

Last year, I was especially fulsome about the move to raise the value added tax threshold to £35,000. As I understand it, it is now to be raised to £36,600 which is a significant improvement. It must make sense for VAT inspectors not to have to rush around to small companies, picking up tiny sums of money. It must also make sense to allow the businesses—the one-man bands—that are getting started to do so without the aggravation of filling in VAT forms and the difficulty that that brings until they are established, until their turnover increases and until they are able to launch out and participate in the normal run of tax collections as they get bigger. I appreciate the raising of the threshold, but we should consider whether it could be even further improved in the years to come.

One issue mentioned in the Budget was the declaration—and it was a declaration—that larger companies must pay smaller companies on time. It is absolutely disgusting that some large companies have bled small companies white by using their power and muscle and by not paying bills on time. It would be invidious to name those larger companies, but they are household names. I go out of my way to avoid buying their products if I have an alternative. The comments by my right hon. Friend the Chancellor about small businesses being paid on time were necessary. I know a small business man who is in desperate trouble because a large company is refusing to pay a very large outstanding bill. All I can say to the larger company is, "Shame on you".

The consideration in the Budget of the cost of appeals to the special commissioners is another move in the right direction. Too often when small businesses have made claims they have met intransigence and it has cost a fortune to fight a case. At the end of the day, the costs have not been recoverable, but now a step has been made in the right direction, and that can only be beneficial.

Mr. John Butterfill (Bournemouth, West)

Does my hon. Friend agree that it is wrong that taxpayers should be intimidated by the thought that they might not be able to recover their costs when they have a legitimate case to take to appeal and that consideration of that anomaly is long overdue?

Mr. Page

My hon. Friend puts the case in a nutshell. I know of instances in which people have said that the game was not worth the candle because it would take too long, and the intransigence of some tax inspectors has wrongfully won the day. Again, I know of a case in my constituency which is proceeding on exactly those lines, but now my constituent will be able to take action. I have considered his case and it is genuine. He will now know that he has the opportunity to recover some of his costs.

My right hon. Friend the Chancellor also listened to the problems of people handing on their companies to ensure that they are not broken up. We all know of the vast costs involved in getting a company started and of the impact of inheritance tax on those who have built a business and want to ensure that it stays in one piece and that it retains its essential individual character. They have the opportunity to do so—now, such companies will not necessarily be swallowed up and become part of yet another branch of a large conglomerate.

It would be wrong of me to speak about the help for the car industry without declaring an interest. What is being done in this context will be a fillip to get motor manufacturers going and will, of course, have a ripple effect across the country. I believe that many people deferred their buying decisions until today, and perhaps what has been said today will encourage them.

My last point might be slightly contentious. Although I welcome what is being done for the British film industry—the one third write-off on a straight line over three years—I have to say that what is sauce for the goose is sauce for the gander. I wish that we could in some way extend that provision to manufacturing industry. If one removes from our manufacturing industry the inward investment and the investment by a few large companies such as British Gas, British Aerospace, Rolls-Royce and ICI, one finds that very little manufacturing investment is being made in this country. In fact, until 1988–89 the growth rate since 1979 works out at only 1 per cent. In a world of increasing mechanisation, of more robotics and more automation, it is absolutely right that we should have increased growth in investment.

However, we have a culture in this country whereby we do not invest, and the hon. Member for Newport, East (Mr. Hughes) mentioned the lack of commitment to training and to research and development. I am afraid that that strand runs through this country and it must be broken. Our foreign competitors have a different culture. We suffer from short-termism, which is unhealthy for long-term survival. Let us consider, for example, Germany. It gives a 20 per cent. allowance against tax for dividends, but no more. If one pays a dividend of more than 20 per cent., one begins to eat into the residual profit of a company. Perhaps we could have some guidance to help to gain investment in our companies.

That issue has what could be described as more insidious consequences because German Members of Parliament are given a specific allowance of more than £650 a month which is ring fenced for equipment such as computers, word processors and faxes. That is the way that they think—they think of investment in automation and of using equipment to ensure a more efficient operation.

The Government have set the seal on the Conservative party proceeding to the general election. Over the years, cutting the rate of tax has left us with more taxes to put into hospitals and schools but, at the same time, we have managed to leave more money in real terms in people's pockets for them to spend as they think fit. That is the opposite of the double whammy. I have absolutely no doubt that the success of the Budget was evident in the faces of members of the Opposition, and it will be reflected in the results of the election.

5.57 pm
Dr. David Owen (Plymouth, Devonport)

Coming prior to an election, the Budget must face the acid test of whether it is irresponsible in budgetary terms and pure electioneering. As I understand it, the Chancellor has added to the public deficit £1.6 billion, which is rather less than many people had thought.

I judge that, by limiting the amount of tax changes, it can fairly be called a prudent Budget and should, in a rational world, allow the Chancellor to reduce interest rates by at least ½ per cent. I strongly wish they could be reduced by a full 1 per cent. in the next couple of days. Whatever was said in the Budget, what will greatly help the British economy and British industry is a further reduction in interest rates. That must be the main essential of any strategy. It would be irrational of the markets to exclude a reduction in interest rates in the next few days. I profoundly hope that a reduction is possible.

As for overall economic strategy, the fundamental requirement for the economy seems to be to improve its competitiveness. Inflation shows every sign of dropping to 3.2 per cent. or 3 per cent. by the end of the year. We must not only achieve but maintain that level of inflation if British industry is to compete in the next three to four years. Those will still be difficult years for our economy because we must overcome the disadvantages of entering the exchange rate mechanism at a rate higher than was attractive for British industry.

The errors of the past five years in handling the economy have been fairly considerable and were predicted. The pre-election Budget of 1987 fed inflation. Then, of course, we had the miscalculation following the stock market collapse in the autumn of 1987. I am less censorious of the right hon. Member for Blaby (Mr. Lawson), the then Chancellor, than many people.

First, I thought that the right hon. Member for Blaby was right to respond to prevent recession and lack of confidence. It has to be said that most people believed that. They believed that the world response was an enlightened response. Nevertheless, we all got it wrong. But the right hon. Member for Blaby, as well as the right hon. Member for Finchley (Mrs. Thatcher), cannot escape serious criticism for their Budget judgment of April 1988. That Budget was grotesquely irresponsible. I and many others said so at the time.

But it was worse than that. It was the one opportunity that we have had to restructure the tax system, abolish the threshold for national insurance contributions and take the steps that the hon. Member for Eltham (Mr. Bottomley) rightly suggested today to bring the tax and social security systems into an integrated pattern. Abolition of the national insurance contributions threshold must be done but must be done at a buoyant time. The right hon. and learned Member for Monklands, East (Mr. Smith) will have great difficulty with his proposal on national insurance contributions if he implements it at a time of economic difficulty. It is a structural change that must be made and it should have been made in 1988. It would have been appropriate in 1988 and the disadvantages could have been offset by changing the 60 per cent. tax rate to only 50 per cent.

However, it is no use looking back. The basic facts were that in 1989, with inflation running as high as it was, we had to rein back the economy. I sometimes think that the Prime Minister is too embarrassed by the phrase that he coined at the time, "If it isn't hurting, it isn't working." There was no escape from the fact that, having fed and stoked up inflation so irresponsibly in 1987 and 1988, coming to grips with inflation in 1989, 1990 and 1991 would be painful. It does not serve anyone's purpose to deny that it would be difficult. But the question is whether we compounded that difficulty.

As I said, we went into the exchange rate mechanism at too high a rate. But we all know that the political difficulty of persuading the then Prime Minister to accept that we should enter the ERM was formidable. We should have entered it in the early 1980s, and certainly when the right hon. Member for Blaby wanted to do so in 1985. There are penalties for having entered the ERM so late.

I wish that some of the people who have so glibly advocated a single currency in the past few months and yet have railed against the constraints of the ERM would face up to the reality that the constraints of a single currency system would be far greater than anything that we have experienced in the past two years inside the ERM. I and the Social Democratic party advocated entering the ERM during the whole of the party's existence. I believe that that discipline is necessary. It is uncomfortable, but it is no use trying to get out of that discipline. It is the price that one pays for being within the ERM.

In the summer I hoped that we might reduce interest rates somewhat faster than we did. But these are difficult judgments and clearly the Chancellor of the Exchequer, certainly with an election approaching, felt that it would be damaging to confidence to reduce interest rates and then risk being forced to raise them again. So he has adopted a cautious approach of ½ per cent. at a time. It is a matter of the utmost importance that we reduce interest rates in the next year to 9 per cent. or perhaps lower.

Another problem is unit costs. Britain simply must face pressure to reduce unit costs for three to four years. That is where we come to the strategy on tax reductions. Listening to the Leader of the Opposition, I must confess that I was nonplussed as to whether the Budget that he would propose in six days would have a reduced public sector borrowing requirement. Certainly the effect of what he said was that he would come in with a reduced PSBR.

Mr. Stuart Bell (Middlesbrough)

How did the right hon. Gentleman work that out?

Dr. Owen

There was constant reiteration of the problem of borrowing to reduce taxation. By implication, he said that the borrowing requirement was too great and, therefore, would have to be restricted. However, we await his Budget.

If we are to keep unit costs down, the section of the labour force who do not have large earnings must be given the greatest relief. That means concentrating tax relief on not only the lower paid but those who receive average pay in manufacturing industry. It is from that section that the pressure always comes to pay ourselves more than can be justified by increases in productivity. This is where we come to the reduced rate band.

In redistribution policy, the best way of helping the poorest section who pay tax is undoubtedly to raise personal tax allowances and take people out of paying tax altogether. However, experience shows that that has little effect on the bargaining position of people in work. They do not feel that they have had a tax reduction when personal tax allowances are raised. A reduced rate band is an interesting way of grappling with the problem of keeping down unit costs and keeping wages in line with productivity.

The Chancellor seemed to suggest in his speech that he intended to use a reduced rate band as a structural mechanism for taking income tax down from 25p to 20p in the pound. Obviously, there are several options, but I hope that he will take that one. I know that it is difficult technically, but I hope that the Chancellor will gradually take more people into the 20p rate band but come at it from below—from the lower paid up through the system. We have never done it like that before. We have simply taken slices of 1p or 2p off the standard rate. Such a reduced rate band would be an interesting development and one to be welcomed.

I am pleased that the Chancellor did not shift the married man's tax allowance. If the tax and benefits systems are to be integrated, the allowance will have to go. The only acceptable way to do that is to allow it to wither on the vine and not to increase it.

In the past two years the Government have shown themselves ready to see child benefit increase. The hon. Member for Eltham described a child cash allowance. That was a good description of the system that we must move towards. We must put child benefit into the tax system but retain the advantage of paying it to the woman, usually the wife, in cash.

To the business community, the alleviations in the Budget are extremely helpful. The one that I am most pleased about is the reduction by 5 per cent. of the new car tax. I should like to see the whole thing go, but it is very expensive and it will already cost more than £600 million to take it down by 5 per cent. The car industry has been preferentially hard hit and therefore needed preferential help. The measures on the unified business rate, VAT and others are small, but they have been sensibly designed to ease where the shoe is pinching in business and to give small businesses in particular, which have certainly felt the recession quite acutely, some welcome alleviation.

Those matters are all small in comparison with cuts in interest rates. If we continue having to keep our interest rates as high as we had to keep them throughout 1991, the recession will bite very deeply in this country. It is already biting harsher than in many other countries. I assume that the Chancellor is confident that, although the Treasury forecasts of coming out of recession have been too optimistic, there is now a real prospect of coming out of the recession in the second half of next year. I hope that that will happen, but the world is still in a difficult state to make any prediction, not least because of the protectionist pressures that are building up.

We have still failed to have a successful general agreement on tariffs and trade negotiation—it hangs over us. There are already in the United States, as evidenced in the presidential elections, very strong protectionist measures. As yet there has been little sign of the European Commission being ready to make the necessary changes in our GATT negotiating position in relation to agriculture. The GATT negotiations are probably the single most crucial matter in ensuring that the world economy starts to move forward.

For all those reasons, we cannot and should not have expected too much from the Budget. This is a difficult time. There is no doubt, too, that, while an election hangs in the air, there is, in terms of international confidence, a tendency to hold back until the election is over. It is probably true that, whatever the result of the election, the markets will view the British economy in a more settled way after it.

This is the last time on which I shall speak to the House, and I do so with a certain sadness but also with the belief that it is high time I went. No right hon. or hon. Member can leave the House without paying tribute to his or her constituency. I was born in the city of Plymouth, and I have represented it in the House for nearly 26 years. That has been a great privilege and something on which I shall always look back with pride. I have also managed to beat the record of Nancy Astor, and I am now the longest serving Member of Parliament in Plymouth's history.

My great gratitude to my constituency goes back to one single thing. The House was brought up on a dictum that Disraeli apparently taught about politics—"Damn your principles and stick to your party." That dictum has obviously been successfully followed by many people. I have turned it upside down, and I have no regrets about that. The House and parliamentary democracy survive because, from time to time, people understand that issues and principles go far beyond party and go to the root of how we regard representation in the House. It should be about how we regard and represent the best interests of our country. That must always come before our constituencies. However, at the end of the day, we must justify those decisions to our constituencies. The one thing that I shall always hold dear is that, when in 1983 my constituency was asked to endorse my decision to put what I thought were my principles before my party, it endorsed me.

6.14 pm
Mr. Ray Whitney (Wycombe)

It is a great privilege to follow the speech of the right hon. Member for Plymouth, Devonport (Dr. Owen). As he said, it was likely to be his last speech in the House. It is a privilege because all hon. Members recognise his distinguished career and the contribution that he has made to British political life over a number of years. I know that the right hon. Gentleman will not take offence, but there is some irony in the light of that privilege. I was a public servant in the Foreign and Commonwealth Office when the right hon. Gentleman was Foreign Secretary. The reason I decided to make the extraordinary leap from the warm bosom of the Foreign Office to the hurly-burly of political life was that I was appalled at the state of Britain under the Labour Government of which the right hon. Gentleman was a distinguished member. I often say that the right hon. Gentleman himself was responsible for my coming to this place.

I was happy to agree with much of what the right hon. Gentleman said. However, in his criticism of the policies that were followed by my right hon. Friends in 1987 and 1988, the right hon. Gentleman was luxuriating a little in the benefits of 20:20 vision which the advantage of hindsight gives to observers. I say that as someone who can honestly claim that in January 1988 I was one of those—there were not many of us—who were warning about the dangers of relaxing the fiscal stance, whereas my right hon. Friend the Member for Blaby (Mr. Lawson) was under pressure from Opposition Members to reduce interest rates to relax the stance still further.

The indicators that were available to the Treasury and to my right hon. Friend suggesting that the air was going out of the balloon were inaccurate. That shows that Chancellors of the Exchequer, of whatever political complexion, need better indicators, but that matter is for the past.

I agree with the right hon. Member for Devonport about the undoubted difficulties that there will be in achieving a single currency. I am positive about Europe and optimistic that we can achieve that happy state in a relatively short time, but it will undoubtedly take a number of years. There will undoubtedly be the difficulties to which the right hon. Gentleman referred. The facile Labour party, having twisted its policy on Europe six times, has now leapt into the single currency issue. That is another manifestation of its unfitness to govern.

The right hon. Gentleman is absolutely right to suggest that this is a responsible, prudent Budget and that the tax changes which have been announced and which seem to add about £1.6 billion to the PSBR should be well regarded by the financial markets and should give the opportunity for a further reduction in interest rates, which is badly needed. I hope that the right hon. Gentleman is right, and I endorse his sentiments.

Undoubtedly, Britain faces a difficult economic situation, as does the rest of the industrialised world. When all the political cant is swept away, right hon. and hon. Members must recognise that, if they are to treat the present difficult situation with the gravity and responsibility that it deserves, it does no good to pretend that it is just a British problem. Sadly, the problem may be exacerbated if we cannot make proper progress in the Uruguay round of the GATT negotiations, as my right hon. Friend the Chancellor of the Exchequer pointed out. From my humble position on the Back Benches, I strongly endorse my right hon. Friend's argument. I urge some of our European partners, particularly our friends in the French Government, to consider their policies and attitudes carefully and take account of the needs of the world trading community.

It is not only the European Community that has to make a move; America and other countries involved in the negotiations must also do so. We all have a responsibility, particularly the Heads of Government of the G7 nations who, when they last met under the leadership of my right hon. Friend the Prime Minister, gave a personal pledge that they would do all in their power to ensure that the Uruguay round was successful. That pledge has yet to be honoured.

It is against that background that we should decide whose hands are required on the tiller of the nation's economy at this difficult time—with the Budget and an imminent general election. I have no doubt that today's events and what has been said in the House, by Opposition and Government Members, make that answer crystal clear—as has the Government's overall sound record of economic management since 1979.

My right hon. Friend the Chancellor was faced with an extremely difficult problem. As many of my right hon. and hon. Friends continually and rightly stress, it is true that conditions have now been created for the economic recovery that we so badly need. Inflation is down to an encouraging level, and the forecast given by my right hon. Friend the Chancellor of further reductions in inflation is greatly to be welcomed.

The interest rate cuts—we have already had eight in 18 months—are also to be welcomed. In addition, the rise in company and personal savings has set in place the conditions for recovery. Now we need the restoration of confidence, which means a general election and a Conservative victory. I have no doubt that my right hon. Friend's Budget will contribute mightily to that.

As for my right hon. Friend's judgment, all of us with an instinct for financial rectitude will consider carefully the fact that we have a public sector borrowing requirement of £14 billion this year, which will move to about £28 billion next year. In order to be satisfied that that is the right policy, one has to take a close look at the facts. I am absolutely convinced that it is the right policy, and a glance at the record of past years serves to highlight that.

Try as they might, politicians can never eliminate the trade and business cycles. We are in the dip of a particularly severe trade cycle. It is due to the depth of that recession that we must take a flexible approach to public sector funding and borrowing, albeit always within the tight parameters of a responsible fiscal stance. Our achievements since 1979 give us every right to take credit for adopting the proper approach.

The Hansard report of 6 March, at column 322, makes it clear that, from 1984 until this financial year, there was no net borrowing requirement. That is the background against which to judge that our country's finances are strong enough to take the £28 billion public sector borrowing requirement now in prospect. It is interesting to compare that figure of £28 billion—if it is reached—to the sort of figures to which we grew accustomed in the years of the Labour Government.

In terms of 1991–92 prices, in 1974–75 the public sector borrowing requirement reached £38.9 billion and the next year it rose to nearly £40 billion, before the International Monetary Fund had to step in and help the then Labour Government back on to the path of the straight and narrow. Therefore, it ill became the Leader of the Opposition, in an extraordinary and lamentable response to my right hon. Friend the Chancellor, to talk about bribing and borrowing to bribe. Such remarks came from the leader of a party which now proposes a shopping list of £37 billion more of expenditure, which boasts and glories in the fact that it intends to increase taxes and which would clearly increase interest rates and destroy jobs and the economy. Therefore, there is no doubt that the Labour party is incompetent to handle the economy. That has for long been demonstrated by its abysmal record when in government and, again and again, by its pathetic policies—despite the fact that it changes them all the time.

The Labour party's incompetence was underlined this afternoon when, not having had the benefit of a briefing from his colleagues, the Leader of the Opposition was not clear as to whether the Labour party would reject the imaginative and extraordinarily helpful decision by my right hon. Friend the Chancellor to produce the 20 per cent. tax rate. The Leader of the Opposition left the House with the impression that the Labour party would eliminate that 20 per cent. tax. The 4 million people in this country whose total tax payable would be reduced from 25 per cent. to 20 per cent. would be interested if it turned out that the Labour party did intend to eliminate that 20 per cent. tax. When discussing the tax equation, the Leader of the Opposition seemed to have no understanding of our experiences since 1979, which show that lower tax rates result in a higher tax take, a higher tax revenue. That proposition, which seems simple to most of us, seemed beyond the grasp of the Leader of the Opposition.

The decision that the country should take is clear at any time, but particularly at this extremely difficult time of economic challenge for this country and for all other countries of the developed world. The idea that the economic tasks that we face can be left to the Opposition to solve is unthinkable; such tasks must be left to my right hon. Friend the Chancellor.

I greatly welcome all the measures put forward by my right hon. Friend, particularly the help given to pensioners on low incomes, the provisions on savings, inheritance and business rates and the help for the car industry. All those policies add up to a great package, which must be added to the significant additional spending set out in the autumn statement. I have great pleasure in congratulating my right hon. Friend the Chancellor and his colleagues on what they have achieved, not only for the Conservative party but for the country.

6.28 pm
Mr. Stuart Bell (Middlesbrough)

It is a pleasure to follow the hon. Member for Wycombe (Mr. Whitney)— not least because he will not be retiring at the next general election. The same cannot be said of the right hon. Member for Plymouth, Devonport (Dr. Owen), who I am glad to see still in his place, and the hon. Member for Halesowen and Stourbridge (Sir J. Stokes).

The hon. Member for Wycombe was right to refer to the GATT negotiations and to the important and significant personal pledge made by the Government leaders that they would intervene to ensure that those negotiations reached a successful conclusion. Was that promise genuine, as I hope it was, or just another sound-bite promise, made of the moment to impress people and to allay their fears, but amounting to little?

The hon. Member for Wycombe asked whose hand was on the tiller. We will quickly know that answer, and it may come as a surprise to the hon. Gentleman. He mentioned that there have been eight reductions in the interest rate, which currently stands at 10.5 per cent. I dislike giving the hon. Gentleman bad news, but no Government have ever won a general election when the interest rate was above 10 per cent. I share the hopes of the right hon. Member for Devonport that we will see, in the interests of the economy and of the British people, a reduction in interest rates between now and the general election—although I understand that the odds are not that good.

The hon. Member for Wycombe referred to financial rectitude. I always smile when I hear that phrase. I am reminded of one of Lord Denning's famous summings up, when he observed that the more that a defendant talked of his honesty, the more one was tempted to count the silver. When I heard the hon. Member for Wycombe, I thought that I had better start counting my silver. The hon. Gentleman referred also to a responsible fiscal stance. We will have some fun with that phrase as this debate continues over the next few days.

I was pleased to be in the Chamber for what might be the last speech by the hon. Member for Halesowen and Stourbridge, who made a telling point when he said that our economy was increasingly being linked to Germany's economic and financial policies and to those of the Bundesbank.

I also enjoyed the speech of the right hon. Member for Devonport, although he may not have understood the remarks of my right hon. Friend the Member for Islwyn (Mr. Kinnock), to which the hon. Member for Wycombe referred. My right hon. Friend did not have the benefit of knowing in advance the contents of the Budget and had to make decisions and judgments as to the content of his speech as he went along. Today, he was right to desist from criticising the Government's specific tax policies and to welcome the tax cuts that will benefit the car industry, among others.

Today was the first time that the Opposition have been able to see the Treasury's books. We will be able to present an alternative Budget next week that will inform the British public of our proposals for the British economy.

The Chancellor mentioned a move towards the narrow band in the exchange rate mechanism and linking sterling to a rate of 2.5 deutschmarks. The challenge awaiting the next Chancellor of the Exchequer is how to equate a fixed interest rate with rising unemployment throughout the Community. No Government—whether it be that of Ireland, France or Italy—have come to terms with that difficulty. How can one reconcile the exchange rate with job creation and lower unemployment?

The Chancellor said that tax revenues depend on the level of activity, but he seems again to be going for a consumer boom rather than one based on investment and manufacturing. If we are tempted to follow the route of consumer boom, we will risk institutionalising the boom-bust philosophy with which we have lived for too long.

The Chancellor spoke of a Budget for recovery, but it seems more like a Budget of discovery. He believes its almost exclusive emphasis on tax cuts will be sufficient to switch public opinion, and that will he seriously tested when the general election is called. The Budget's proposed 20 per cent. tax rate on the first £2,000 of income will be worth £2.65 to the average working man and woman. That is the equivalent of 30 pieces of silver in olden times. We will have to see whether the British people accept those 30 pieces of silver.

I will share one secret with the Chancellor and the House. The low-paid generally vote Labour, and I do not believe that the Chancellor's endeavours to tempt Labour voters will be rewarded at the general election. Those who might stand to benefit from such a tax reduction and who might even come out of the tax band altogether will not so easily forget the last 13 years of Conservative government.

According to the Chancellor, that tax cut will cost £1.8 billion in the next financial year and £2.3 billion the following year. That is expenditure on tax cuts rather than on hospitals, schools, or—as my right hon. Friend the Member for Islwyn said—putting an extra bobby on the beat. When there is both an increase in the public sector borrowing requirement and tax reductions, we are right to claim that it is an attempt to bribe the British people.

Mr. Butterfill

Does the hon. Gentleman agree that the richer taxpayer will be penalised because the threshold at which higher rate tax becomes payable has not been increased by the rate of inflation? Perhaps that will come as some compensation to those who imagine that the Budget is aimed at the relatively wealthy.

Mr. Bell

I am grateful to the hon. Gentleman. Although we had no prior knowledge of the Budget's content, we anticipated some of its provisions. The 20 per cent. tax on the first £2,000 of income will affect the rest of the tax system. I take the hon. Gentleman's point that the Chancellor, by leaving the indexation of allowances at 4.5 per cent., has probably not done higher rate taxpayers a service.

My right hon. Friend the Leader of the Opposition put the Budget into perspective when he referred to the £100 billion of North sea oil revenues that have been used over the years. The hon. Member for Wycombe mentioned that a Labour Government incurred a £40 billion deficit. Our policy, right or wrong, was to borrow against oil revenues, because we did not want a slump worse than that which was already occurring because of oil price rises in 1974. We opted for a policy of borrowing against future North sea oil revenues. As it turned out, that policy was not acceptable to the IMF, and the Labour Government of the day were forced to change course. That is the context of the deficit to which the hon. Member for Wycombe referred.

It is right at a time of recession to try to stimulate the economy with fiscal measures. I recall James Callaghan saying in 1976—it was one of the first speeches that I had heard at a Labour party conference—that we could not spend our way out of recession. The days of deficit spending were over, he said.

Today we have the novel approach that we can borrow money to reduce taxation, and the claim is that somehow that will spark a consumer boom, which in turn will generate jobs and aid the economy. It is an interesting argument and, as the right hon. Member for Devonport said, it represents reducing taxation from the bottom upwards. We, too, described it as an interesting concept.

All that aside, we must consider the overall economic situation. It is clear that we have had five quarters of falling output—the longest period of falling output since the war. Although the fall has been less sharp than it was in 1980–81, the time of the first Tory recession, this is the longest recession since the 1930s.

I do not want to bore the House with statistics. Output as a proportion of GDP fell by 5 per cent. in 1980–81, compared with a 3.5 per cent. fall for non-oil GDP. The statistics come from the Bank of England. If all roads lead to Rome, all the fingers of culpability point to Her Majesty's Government, who over the years have followed false gods and prophets. For example, the Conservatives have consistently followed the false god of high interest rates as the single club policy to reduce inflation. The right hon. Member for Devonport recalled the phrase used about a high interest rate—that if it is not hurting, it is not working.

As a result of those policies, unemployment has been rising and output falling. The output of the construction industry has fallen by more than 12 per cent. since the first quarter of 1990. Our car manufacturing industry was sustained only by exports. The Chancellor said that the motor industry switched production to exports, which rose by 20 per cent. in 1991. But, because it is a world recession, those exports have fallen. This is the only aspect of a so-called world recession that affects our economy.

That is why I—I am sure that the same applies to hon. Members on both sides of the House—support the reduction of the special tax on motor cars to 5 per cent. from midmight tonight. We, too, hope that manufacturers will pass that on fully to the consumer and that, as a result, car purchases will increase in the coming days.

We are likely to hear many metaphors used in this debate. The hon. Member for Wycombe referred to hands being on the tiller. I have spoken of the Tory false god philosophy of believing that manufacturing counts less than services, even though the service sector could not sustain itself in the face of last year's increase in VAT. The effect of that increase on that sector was underestimated, as was the effect of the Gulf war on tourism.

My hon. Friends and I noticed wryly the Chancellor's statement that he had no intention of raising VAT or extending its scope. We shall keep an eye on that promise in the future. As the Leader of the Opposition pointed out, a similar promise was made by the right hon. and learned Member for Surrey, East (Sir G. Howe) in 1982 when he was Chancellor.

We are reminded of Conservative central office myths. One of them was perpetuated this morning by the right hon. Member for Croydon, South (Sir W. Clark), who is not in his place and who will be leaving us at the election. I have often heard his insistence that we should not speak from copious notes but, like the right hon. Member for Devonport, should speak, if possible, without notes. I admit that the right hon. Member for Devonport did that ably this afternoon.

The right hon. Member for Croydon, South tried to persuade us of the Conservative central office myth that in the last 13 years of Conservative rule taxation had been reduced, and the hon. Member for Wycombe developed that myth in his speech. In fact, from 1979 to date, taxation has increased across the board, from 34 to 37 per cent. Allowing for a possible adjustment downwards should the effect of today's Budget be felt in full, VAT has been increased during those years from 8 to 17.5 per cent. and national insurance contributions have gone up from 6.5 to 9 per cent.

Mr. Whitney

The hon. Gentleman misunderstood me. I said that it was a demonstrated fact that lower rates of income tax produced a higher tax take. I said nothing about indirect taxation.

Mr. Bell

I am grateful to the hon. Gentleman for that intervention and for reiterating his view that the Laffer curve is alive and well. Ronald Reagan was perhaps the first to suggest that, if one reduced the rate of tax, one somehow raised more money. In reality, that theory does not stand the test. It is not possible to reduce taxation and increase the take. That has never been true, and it never will be the case.

Our criticism of the Government is that in recent years they have not adopted a proper perspective towards manufacturing and service industries. They have not had an appropriate monetary policy, other than membership of the ERM, which is the new gold standard of the Conservative party. Apart from that, the Government's only other policy has involved high interest rates. They have had no plan for the long-term unemployed. I am glad to note that my hon. Friend the Member for Newport, East (Mr. Hughes) has fully recovered his health. As he pointed out, the Chancellor did not once mention training, yet there have been great cuts in training programmes for youngsters.

The Government have no plan to stop the reduction in investment. Only an adequate policy on that front will increase output, yet the Chancellor said that it was not for the Government, but for the private sector, to lead the way and create a climate which will lead to more employment.

We see no plan to help those who have lost their jobs. My right hon. Friend the Leader of the Opposition referred to the 800,000 people who had lost jobs—[Interruption.] Conservative Members will not put me off my stride by yawning or making sedentary comments. Indeed, their yawns probably reflect Conservative party thinking on the Budget.

There was no reference in the Chancellor's speech to the young people in society who are growing up amid increased crime, the figures for which were announced yesterday. There is increased irresponsibility in society, yet the Government are washing their hands of all such matters. Children are growing up without any prospect of getting jobs. Society should reflect a sense of shame at that state of affairs, and I regret that nothing has been said about that by Conservative Members. After all, we bear some responsibility for the situation, in Government and in the House generally. People are growing up without the future to which they are entitled, much of that being due to years of Conservative rule.

The Chancellor said unequivocally that unemployment would continue to rise, and unfortunately we know that to be true. We were hoping for a Budget for investment rather than one that will assist consumerism and lead to another boom/bust situation. The Government are impoverished in their approach towards financial matters. They have allowed their single club policy of high interest rates to decimate the nation and our outlook on the world as a financial and exporting country.

Not long ago, a former Chancellor of the Exchequer, the right hon. Member for Blaby (Mr. Lawson), whose presence in the Chamber we shall miss after the election, said that the medium-term financial strategy had a monetary and fiscal component. He said that in place of a steadily declining gold standard we had a steadily declining path for monetary growth and in place of a balanced budget we had a similarly declining path for the public sector borrowing requirement until a balanced budget was once again secured.

Where is the judgment of the present Chancellor of the Exchequer, as expressed in today's Budget? Where is his prudence and discretion? The only good thing that can be said about the Chancellor is that at least he has not been put in charge of forecasting our weather and he has not told us that a hurricane is not coming when one may be approaching. In the past year, he has refused to accept that we are in a recession and he has spoken about the economy using a whole set of metaphors such as, "we have turned the corner", "there is light at the end of the tunnel" and "there are the green shoots of spring". He made all kinds of suggestions that the economy was turning around, but it was not.

Why do the Government think that they can so easily dupe the British people? As Winston Churchill once asked at another time and another place, what kind of people do they think we are? Do the Government think that they can give us two recessions—first, the deepest since the war and, secondly, the longest recession, sandwiched between an economic miracle that turned out to be an economic mirage and low inflation, hard fought for by the British people? That was followed by high inflation, which also cost the British people dear, and economic mistakes that the Chancellor has freely admitted. Indeed, many Secretaries of State were queueing up on Sunday to give their version of events in 1987. They say that there was an overreaction to the stock market crash and they are happy so long as the blame rests on the right hon. Member for Blaby, who must take responsibility for those terrible events.

Now, after all those freely acknowledged mistakes, the Conservative party wants to be given another term of office. Why should the British people support this bogus prospectus of a Budget? It has no means of becoming the law of the land prior to election day but is simply a promissory note from a Government whose half-fulfilled promises are strewn back over the years like bricks on a derelict building site. Why should the British people fall for the equivalent of a three-card trick? When the time comes, they will not.

I shall come to my peroration in order to keep the Government Whip, the hon. Member for Staffordshire, South-East (Mr. Lightbown), happy. He is not as polite as usual in such debates. If this is a political Budget, so be it. Some hon. Members have called it prudent and popular. The hon. Member for Wycombe said that it was a prudent Budget. I call it perturbing and petrifying. It is the Budget on which the Prime Minister wishes to hold a general election. If it is the best promissory note, bill of goods or delivery note that he has to offer, then, to paraphrase Macbeth: "If the deed were to be done, 'tis best it were done quickly."

A general election is welcome and a Labour Government will be a godsend.

6.54 pm
Sir Anthony Grant (Cambridgeshire, South-West)

I am always glad to follow the hon. Member for Middlesbrough (Mr. Bell) because he is one of the few Opposition Back Benchers who understand financial matters. However, he was below form today. Indeed, I formed the impression that he had prepared his speech before hearing the Budget. I suspect that it was a draft election address and, if so, I shall give him a little advice—it was too long.

The hon. Gentleman certainly knows more about finance than does the Leader of the Opposition. The task of responding to the Budget statement, no matter who has that task, is one of the most difficult roles in the House. Over the years, I have seen many hon. Members having to do it and I know that it is extraordinarily difficult. I like the Leader of the Opposition—anyone who likes rugby cannot be all bad—but his performance today reminded me of Twickenham: England 24, Wales nil. He did not contribute much to the debate.

May I make a personal remark to you, Mr. Deputy Speaker, and, through you, to Mr. Speaker? This seems to be an evening of swan songs, although I hasten to assure you that it is not mine. This will be the last occasion on which I speak in the House under your Deputy Speakership and the Speakership of Mr. Speaker. The three of us entered the House at the same election and I shall miss both of you enormously because your contributions to parliamentary democracy over many years in this House have been remarkable. I hope that you will accept my remarks and convey them to Mr. Speaker.

I was interested in the speech—another swan song—of the right hon. Member for Plymouth, Devonport (Dr. Owen), whom I often follow in Budget debates and with whom I nearly always agree. I particularly liked his point about an overriding need for this to be a prudent Budget. I was anxious lest there should be any risk that the Budget damaged the pound and created a danger of interest rates being increased. The danger has not gone, however, because we live in a world where the German and other economies affect us. But I am extremely relieved, as was the right hon. Member for Devonport, that the Budget is sufficiently prudent to reassure the markets and avoid the dangers of increasing interest rates. One of the greatest curses from which we have suffered has been high interest rates. I have said time and again in interventions and speeches that, above all, we must get interest rates down and not let them increase further. Another danger is the prospect of a Labour Government because it is acknowledged that there would be an immediate increase in interest rates, which would be catastrophic to a country trying to get out of recession.

I have always advocated strongly the need to resist protectionism, so I am glad that my right hon. Friend the Chancellor made that clear. If there were a wave of world protectionism, we would suffer as much as anyone. Some countries—perhaps the United States—could sustain it, but countries like Britain and other European countries could not do so. That is why we should ram home to our French partners the need for a sensible resolution to the talks on the general agreement on tariffs and trade.

I shall not go through the whole of the Budget but, ever since I have been in the House, I have been interested in two aspects of financial debates and Budgets. The first is small firms, which have always been near to my heart, and the second is the cause of wider share ownership. I used to think that I was the first Minister responsible for small firms until I discovered that my right hon. Friend the Member for Cirencester and Tewksbury (Mr. Ridley) held that post for a short period. Ever since I had those responsibilities, I have believed that small firms and their success are the essence of a free economy and that they are vital to the future of our nation.

My right hon. Friend the Chancellor was right to identify three ogres that terrify small firms: the uniform business rate; the horrors of the VAT man and the VAT regime; and the problems of credit control and the recovery of debts. He has dealt with all those problems. His proposals on UBR will be particularly well received by the small firms in my constituency. Likewise, easing the tyrannical and over-rigid VAT policy and his proposals for recovering debts will be welcomed. When I was Minister responsible for small firms, there were substantial complaints about debt recovery and the way in which large firms played the credit game. They played it with enormous skill—[Interruption.] It would not be fair to name such a firm. GEC was oppressive on its small contractors and had an enormous team of people stringing out the payment of debts until the last possible moment, which was intolerable to small firms.

I welcome what the Chancellor has done about Government contracts, but it is not enough; he may have to consider draconian legislative measures to ensure that the credit game is not played by larger firms on their smaller sub-contractors.

As for my second interest—wider share ownership—I was a founder member, together with the late Maurice Macmillan and my right hon. Friend the Member for Croydon, South (Sir W. Clark), of the Wider Share Ownership Council. For years we bumped along. Then we had the 1965 Budget, introduced by Lord Callaghan, which was catatrophic and highly damaging to the whole idea. It was not until recent years that wider share ownership became fashionable and popular. I therefore strongly supported the personal equity plan system introduced by this Government, and their other improvements, which I hope represent only the start of further developments which will encourage wider share ownership.

I particularly rejoice at one event under the regime of this Government. For the first time since the war, there are more individual shareholders than there are members of trade unions. That is healthy for a free society.

I was also pleased by the announcement that the autumn statement is to be abolished—or rather, that the spending statement is to be combined with the tax-raising Budget. The present system has always seemed to me absurd and it is not understood by the public. The long lapse between announcing what will be spent and how it will be raised has meant that by the time we get to the Budget people have forgotten the enormous commitments that the Government made the previous autumn to expenditure on health, education and other desirable things. At the time of the Budget people ask why we are lowering taxes and why we do not spend more on health and education, forgetting entirely that tax-raising and spending are quite separate exercises. Bringing them together in this way is thoroughly sensible.

I should like to respond to a point made by the hon. Member for Middlesbrough about taxation. Before the Government came to office I believed and argued that there should be a shift from direct to indirect taxation, because direct taxation is a tax on work, which is largely involuntary, whereas indirect taxation is a tax on spending, which is, to a much greater degreee, voluntary. That is what the Government have done, and they have no reason to be ashamed of it. It is in line with the policies on which they were originally elected.

I am glad—contrary to what the Opposition hoped—that there is to be no increase in VAT, and that the Chancellor still managed to reduce direct taxation. A philosophical word about taxation: one comes across an extraordinary number of simple souls who say that they would not mind paying a little more tax to have a better health service or a better education service. Such people are usually talking about other people's taxes, not their own. When I attend meetings of teachers or health service workers in my constituency, they ask why we cannot pay our nurses and teachers more. I ask how that is to be done —by increased taxation? That seems a simple solution, but these people do not want the money taken from their taxation, because if it is they will need yet more money to pay the higher taxes, and so the crazy circle continues.

This is a dilemma with which the Opposition must wrestle, and it is clear from their proposed £37 billion extra expenditure that they have not thought it through properly. They must consider who will bear the burden. They appear unwilling to consider that, so I am afraid that the chickens will come home to roost.

Mr. Chris Smith (Islington, South and Finsbury)

Talking about chickens coming home to roost, the hon. Gentleman will have observed from the Red Book published concurrently with the Budget that the overall burden of taxation in 1978–79, the last year of Labour government, was 34.75 per cent. and that for the year 1991–92 it is 36.75 per cent., clearly a higher figure than the Government inherited. The hon. Gentleman will also have observed that the projection for 1996 is a burden of 38 per cent. taxation, a dramatic increase. It is this Government who are putting up taxation.

Sir Anthony Grant

I assure the hon. Gentleman that I shall read the Red Book avidly. I have not yet read all of it, but I accept what he says. However, he has missed my point, which was that I sought a change from direct to indirect taxation. That change has come about. I do not dispute the hon. Gentleman's figures. I maintain that it is vital to reduce the burden of direct taxation because it is a tax on people's work. That is what the Government have done, and I am glad that the Chancellor has continued the process today. And he shot the Opposition's fox by providing the benefit at the bottom end and helping the less fortunate people, not the well-heeled. As a result, 21 million people will be an average of £142 better off, with those at the bottom of the scale doing best. That is probably what has annoyed the Opposition.

This has rightly been described as a Budget for recovery. When the recovery comes, as it will, East Anglia in general and Cambridgeshire in particular will be among the first to recover. The Budget creates the right framework for that recovery, because our area is full of small firms and of people anxious to work and to assist the economy. All we need now is that spark of confidence. The Budget provides the right climate. The spark of confidence will come when my right hon. Friend the Prime Minister is re-elected as Prime Minister.

7.6 pm

Mr. Derek Enright (Hemsworth)

I made my maiden speech when you, Mr. Deputy Speaker, were in the Chair, and this will probably be my last speech when you are in it. May I take this opportunity to wish you a happy retirement and to thank you for your courtesy and great tolerance of much of what I have done? You have been an excellent mentor.

This has been my first Budget since I became a Member of the House. Budget day is supposed to be a great and exciting day—it has a certain charisma. Those of us who have been outside hitherto looking in on the Budget have imagined keen minds working through every full stop and comma. We have supposed there to be great interest among Government Front-Bench spokesmen, and a crowded House until the late hours.

Of course it is not quite like that. There has been yawning on the Government Front Bench and little real examination of what the Budget does. The hon. Member for Wycombe (Mr. Whitney) put his finger on it when he asked whose hand was on the tiller. He got it wrong; he should have asked whose hand was in the till. This Chancellor has put his hand in the till and, instead of paying the bills, he has taken the money for a night out.

I suggest that this Budget is irrelevant to people's real needs. That is certainly true of Hemsworth, where we have suffered from a great barrage of Tory propaganda recently. Tories claim that 17 million days were lost through strikes in the last year of the Labour Government. In the past three days of this Tory Government 17 million days have been lost through unemployment. That puts it in perspective. This Budget will do nothing for the record number of people who are unemployed in my consituency.

Mine also happens to be a constituency with many medium and small-sized firms. Some of them pay good wages, but some pay truly appalling wages, with the result that a large number of people in work will not even earn enough to benefit from the tax changes made by the Chancellor. Other people will have any advantage from these changes clawed back through means testing on a variety of benefits. In other words, poor people at the bottom of the scale will be hit every time by what the Government do.

One thing that the Government could have done to give a bit of equity, fairness, justice and even mercy to the people at the bottom of the scale would have been to examine what happens with invalidity benefit. It is a scandal that those on invalidity benefit—heaven knows, it is not generous—have to pay for their many prescriptions and cannot invest in the future and get cheap prescriptions. The Chancellor did nothing about that.

What did the Chancellor do to get job creation going? At one point, he boasted about the Government's splendid training programme. It is about time that the Government looked at some of those programmes, because they are not training for real jobs. The training programme is producing cheap labour for people making a handsome profit, and whom the Government help further with their tax policies. Remarkably little real training is going on and that is a scandal and a disgrace.

How has the Chancellor helped people on occupational pensions? He claimed to have done great things for them, but let me tell him about miners' pensions. Every Christmas, miners' pensions are updated by perhaps £1 or £1.5. That is then clawed back. In one case a miner not only had his £1.5 clawed back but had another 6p taken off him. Why does not the Chancellor do something about such anomalies? Perhaps it is because he does not care about them, so he does not care about defending the people whom he is hurting.

The right hon. Member for Plymouth, Devonport (Dr. Owen) said that the Government should not be ashamed to say, "If it's not hurting, it's not working." That may be the case, but if one knows that one is hurting people, it is a normal human instinct to protect the most vulnerable. There was no sign of that in the Chancellor's speech. He did nothing to help them.

The right hon. Member for Devonport spoke about the European Community and how he had stood by his principles rather than stay within the Labour party. His narcissistic tour of what happened made me rather sick, because some of us have had principles about the European Community and were consistent about them for a long time but stayed in the party and had the guts to fight instead of ratting on those who supported us. I yield to none in my consistency of approach to policy on the European Community.

The right hon. Member for Devonport rightly said that the exchange rate mechanism would impose a discipline, and that is important. When it comes to economic and monetary union, that discipline will be even tighter. What is meant by imposing a discipline? What action do we have to take afterwards? That is what we should be considering. There is no easy way out and we need thinking policies. The Government think only of interest rates. They are incapable of seeing things three dimensionally. Within economic and monetary union that truly accepts the European Community, we have to work out our salvation, on many fronts, alongside our partners. The Chancellor did not mention collaboration with Europe.

The Chancellor uttered some throw-away lines about the minimum wage. I am not ashamed of the minimum wage which is a just wage. Like the hon. Member for Eltham (Mr. Bottomley), who mentioned this in his speech, I was brought up in a Christian household which believed in the just wage. We believed that a person who did a decent day's work deserved enough to look after his family and have a home and a reasonable standard of living—nothing extravagant. That is all that the minimum wage is based on. I doubt whether our modest proposal will even achieve that basic requirement, but it will be a move in the right direction. I have no doubt that, by talking to our European partners, we shall be able to get the level playing field that is required and, as a result of our willingness to co-operate, we shall have co-operation from them to assist us in our fight, and that is also important.

Although there have been a couple of derogatory references to it since the statement, the Chancellor made no mention of the social charter. What is wrong with it? What are the Government so frightened about? The charter does not mention trade unions, so it does not give them any priorities. It says that workers should be treated decently. If I go to IBM or ICI, they will tell me that they want to treat their workers decently. My hon. Friend the Member for Middlesbrough (Mr. Bell) will confirm that ICI treats its workers decently. It is already fulfilling the social charter and that is why it is a successful firm.

The firms which are not successful are using cheap and slave labour, and they do not have a co-operative work force. They have people who work for them because they are compelled to, but they do not have people who are proud of the work that they are doing, who are keen to make their firm do better and who are willing to put every effort into ensuring that their firm is the best in the area. The Government are opposed to that. Everything the Chancellor said was irrelevant to such a system.

Small businesses need help. Conservative Members have spoken as though the Chancellor had said something wondrous about small businesses. He did not go as far as the Prime Minister went when he signed an early-day motion—way back in the halcyon days of the 1980s when Margaret was queen—that spoke of "compulsory" interest being levied on late payments. That is the only way to help small businesses. One cannot rely on the integrity of the big boys, despite what the hon. Member for Halesowen and Stourbridge (Sir J. Stokes) said.

If we are to help small businesses, we must do something about the business rate. I do not know why Conservative Members think that southern businesses are assisting northern businesses. Businesses in my area, the Wakefield metropolitan district council area—my hon. Friend the Member for Pontefract and Castleford (Mr. Lofthouse) will bear this out—have been hammered by the uniform business rate much more than ever they were by the sensitive local authority.

The Budget epitomises what is wrong with the Government's entire philosophy. They are a centrist and Stalinist Government who believe that the centre rules. They do not believe in devolution and trust, except in so far as they send civil servants—the viceroys of the United Kingdom, or at least of Whitehall—to tell elected Members what to do. The Government have no idea of how to make things tick at the bottom, and the Budget totally ignores that.

I am not simply nitpicking. The Budget shows a dereliction of duty and it has no vision for a Britain of the future. It displays the incredible tiredness of a Government who are clearly ready to go and who must go to be replaced by people of vigour and strength.

7.20 pm
Sir Alan Glyn (Windsor and Maidenhead)

This is probably my last performance in the House. My first was over 30 years ago. I thank you, Mr. Deputy Speaker, all the staff of the House and my constituents for their co-operation and help.

One of the most important proposals in the Budget is the one for budgetary reform. As my hon. Friend the Member for Cambridgeshire, South-West (Sir A. Grant) said, for years we have had two financial statements which the public did not understand. It is right that they should be presented as one Budget in December.

I commend the Budget, which has been presented against a background of great difficulty and a world recession. I agree with my hon. Friend the Member for Cambridgeshire, South-West that, eventually, we must move from direct to indirect taxation, which allows the individual control over how he spends his money. The Budget will help the lower paid and the small business man. That is desirable, because for years we have been trying to encourage small businesses.

The VAT payments on account have caused great trouble for small businesses which are hard hit by having to pay it and by being kept waiting for a long time for payment by the big companies. We should go further than the Budget suggests so that not only payment for Government contracts but for all contracts should be subject to a time limit of, say, 30 days. Firms similar in size to ICI are guilty of keeping small companies waiting for payment, although ICI is not guilty of that.

I welcome the tax cuts on British cars because they will help our motor manufacturers to build up sales in Europe where they have done well this year. The cuts will help not only car manufacturers but car component makers and the steel industry.

I welcome the separation in the incomes of husband and wife. It was a great scandal that, even though a wife was earning £10,000 and the husband only £200, he was responsible for his wife's tax. That system has gradually been broken down and the proposal in the Budget will end it altogether. The proposals on inheritance tax are also welcome and will help small business men who save to set up a small business only to see it smashed by inheritance tax. Small companies seem to be neglected by the Opposition even though they are the backbone of the country.

I, and I am sure many other hon. Members, have been approached by many pensioners who have suffered through no fault of their own. I hope that the Government will accept the Social Security Select Committee's recommendations on pensions because they could help people who put their money into a pension fund which was transferred to a Maxwell-controlled fund only to find that the money had disappeared and they had nothing to fall back on.

I regret the defence cuts. They are not part of the Budget but they have been mentioned by my hon. Friend the Member for Halesowen and Stourbridge (Sir J. Stokes). Our forces must be such that they can cope with any eventuality. We never know when they may be required to serve with the United Nations. The Budget is not a vote catcher. It shows the right way forward.

I shall be sorry to leave the House after 30 years. I hope that in the near future more will be spent on staff accommodation and on the facilities provided for those who stay and rest here and have to change and wash. The facilities are ghastly and should be improved in the next Parliament.

Many other matters have been mentioned, including GATT negotiations which will have to be settled. The Budget represents a major reform, a change in the whole financial structure. I welcome the proposal to have a co-ordinated Budget in December. I wish all hon. Members well.

7.28 pm
Mr. Geoffrey Lofthouse (Pontefract and Castleford)

It is always a pleasure to have the opportunity to follow the hon. Member for Windsor and Maidenhead (Sir A. Glyn). I have always held him in great esteem and affection. The House will certainly miss his presence. I understand that he has been in the House for about 30 years, an extremely long time to be in any one place. During the time that I have been here he has always played his part in the debates in which he has had an interest. I, and I am sure all of his colleagues, will be sad to see him leave the House. I wish him a happy and healthy retirement.

Dr. Norman A. Godman (Greenock and Port Glasgow)

The hon. Member for Windsor and Maidenhead (Sir A. Glyn) was the first Conservative Member to cross the Chamber on Thursday last when my hon. Friend the Member for Leicester, South (Mr. Marshall) was taken ill. That was an example of the hon. Gentleman's extremely courteous and caring conduct in the House, both to his political opponents and his hon. Friends.

Mr. Lofthouse

I have seen the hon. Gentleman do that on many occasions.

I understand, Mr. Deputy Speaker, that you, too, will soon be leaving the House. You will certainly be missed. I have known you, too, for many years. I first met you when you visited Pontefract, for a stay of three weeks. That was some years ago, but I remember the occasion extremely well. You have always been held in high esteem in the House and your presence in the Chair will be greatly missed. I wish you a happy and healthy retirement.

Unfortunately, the hon. Member for Cambridgeshire, South-West (Sir A. Grant) has left the Chamber. I shall refer to him none the less because my remarks will not be controversial. The hon. Gentleman referred to my hon. Friend the Member for Middlesbrough (Mr. Bell), who is recognised within the House as one who understands finance. I cannot claim to be a financial wizard, but I wonder whether there are any financial wizards on the Government Benches. If there are, why is the economy in such a mess? We have the Chancellor of the Exchequer and his predecessors, not least the Prime Minister and the right hon. Member for Blaby (Mr. Lawson). The economy, as I say, has been getting into a mess and surely it is reasonable to ask, "Where does the fault lie?"

It is no good the Chancellor of the Exchequer and others saying, "It is a world crisis" or, "It is a European crisis." Of course there are problems throughout the world, but we appear to be in a much worse position than other countries in the European Community, for example, apart from Greece and Portugal. Why is that?

The Budget is an attempt—I do not think that anyone can put his hand on his heart and contradict what I am about to say—to convince the British public that things are not quite as bad as they appear to be. The British public will take some convincing. They are not familiar with the procedures of the House or with national finance, but they are familiar with the consequences of recessions, for example.

No one can deny that there has been great suffering within various sections of the nation over the past few years. Any Government who have been in office for 13 years cannot escape responsibility and blame for what has happened. Whether it rests with the right hon. Member for Blaby, as some Secretaries of State have seemed to suggest recently during television appearances or in the press and publications generally, I do not know, but responsibility must lie with the Government.

My constituents will want to know what the Budget does for them. In the short time that we have had to study the Chancellor of the Exchequer's proposals, there seem to be only two main features within his statement. The first is a public sector borrowing requirement of £28 billion. That will be a millstone around somebody's neck; it will bear upon this Government or the next one. At some stage, it will be a millstone. It is perhaps an attempt to alleviate the burdens of the people including, as the Chancellor of the Exchequer told us today, the lower paid. If the lower paid receive tax reliefs, many of them will lose current benefits. If that happens, they will not be helped too much.

How does the Budget help the unemployed? The Chancellor admitted this afternoon that there was not much hope for them. There are many unemployed people in my constituency. About 20,000 have been thrown out of work since 1985, and since then there have been few employment opportunities. The unemployed want to know how the Budget will help them. In fact, the Chancellor told them: it will not help them at all. The right hon. Gentleman sees no hope at present, in the near future or the medium future for the unemployed in my constituency and in other areas.

Young miners in my constituency—men in their 30s and 40s—have been thrown on the scrap heap. Many of them have had their homes repossessed. What will the Budget do for them? Nothing. What will it do for old miners who are chronically sick? Right hon. and hon. Members have heard me refer on many occasions to miners with chest diseases. I visited some of them only a few weeks ago. There are old miners suffering from emphysema who receive no industrial injury benefit. Many of them cannot breathe without the aid of oxygen. There are men who cannot lift a cup of tea to their lips. I repeat: how does the Budget help them? It does not help them at all.

How will the Budget help local authorities or the fire service? The fire service in west Yorkshire has to cut services year after year. Next year, the West Yorkshire fire authority will have to take decisions that will involve cuts to its emergency service. At the Pontefract fire station there is an emergency service unit that is specially equipped to deal with motorway accidents. The House will know that the M62 and the A1 cross are in the area. There are major chemical factories and there are still one or two pits. The special equipment is essential for the saving of life, and men have been specially trained to use it. First-class equipment will be put in storage because the authority will be unable to afford to employ staff to use it. What will the Budget do for the authority?

What will the Budget do for the West Yorkshire police? I have a report from that force that next year it anticipates that there will be a shortage of 150 uniformed officers and 130 civilian staff. Crime increased in the area by 27 per cent. last year. How will the Budget help to prevent crime? None of us condones the increase in crime; indeed, we all condemn it.

What do we do when hundreds of youngsters between 16 and 20 years are unable to find employment? They get up in the morning, they have no money, and there is nowhere for them to go. They can see no future. I think back sometimes and wonder what I would have done in their position. I used to think when I was their age—I started work at 14—that I was hard done by. We used to leave the classroom on Friday and meet one another down the hole in the ground on the Monday. It was slavery, but my friends and I did not get into mischief. That is because we were not idle. We had a job. The kids who now leave school at 16 do not have employment. What will the Budget do for them? According to the Chancellor, it does nothing. There is no hope at all for those youngsters.

How does the Budget help the health service in my area? How does it help the hospital at Pontefract? An old miner who had been in ward 7 there telephoned me to say that he had had to use his dressing gown for a pillow. That is the truth, not some trumped-up story seeking to appeal to the emotions. I thought that it was a rather outlandish story, so I went to see the chairman of the health authority and told him what the old miner had told me. He made inquiries and he confirmed that there was a pillow shortage, but it was decided to send a few—about five to each ward. How does the Budget help the health authority that is having to put up with such problems?

This afternoon the Chancellor told us that there would probably be a 1p increase in the price of a pint of beer. One might say that that is not much, but for the retired miner and the unemployed miner it is another increase for them to bear. It decreases their spending power. The same applies to the increase in the price of cigarettes. I have no objection to that. It is a step in the right direction because it discourages people from smoking. Nevertheless, those who like to smoke have not been helped by the Budget.

I might have generalised and I might not have dealt with matters of high finance, but I have touched on how the Budget affects people most. The Government can no longer continue to make excuses, saying that they have had only 13 years and that if they have a bit longer they might put matters right. The British public will not swallow that. The sooner the election comes the better for the return of a Labour Government.

7.42 pm
Sir Nicholas Bonsor (Upminster)

It is a pleasure to follow the speech of the hon. Member for Pontefract and Castleford (Mr. Lofthouse). I am grateful to him for the nice things that he said about my hon. Friend the Member for Windsor and Maidenhead (Sir A. Glyn). I think that his tribute was one which all hon. Members would wish to share with him. I very much regret the departure of my hon. Friend. He has been extremely good to me during the 13 years that I have shared with him in the House. I wish him every success in his retirement.

The debate has been a great mixture of speeches made by those who are about to leave the House, those on the Opposition Benches who have been practising their own adoption addresses, covering a range of wholly irrelevant issues in order to fax the speeches to their constituencies, probably in the near future, and those on the Conservative Benches who have properly addressed the Budget. I hope to join the latter category and to do so extremely shortly.

This was a first class Budget which avoided all the pitfalls which many members of the press saw faced my right hon. Friend the Chancellor and on which there has been great speculation during the past few weeks. I am particularly pleased that my right hon. Friend did not take 1p in the pound off income tax. Those who said that that would have been seen as a bribe were right. It would have been ineffective and it would have done nothing to improve the state of our economy. I am delighted that the Government avoided going down that path.

Instead, the Government have adopted the dual main thrust for the Budget of helping the elderly who need help, particularly pensioners, and adjusting the threshold to help those in the lower earnings categories. The Government have also succeeded in helping small businesses. Those achievements are extremely relevant to the state of our economy and to Britain's needs.

There is no doubt that the recession is biting hard and causing great hardship. It is a pity that much of the debate on that issue takes place with a kind of myopia. It does not appear that any Opposition Member is prepared to look beyond the channel to see what is happening in the rest of the world. It is not possible to take just the British economy to lay at the feet of successive Chancellors of the Exchequer the blame for the fact that we are in recession. The blunt truth is that the world is in recession. All our major trading partners and all the major export markets into which we hope to sell our goods are in recession.

Mr. Nicholas Brown (Newcastle upon Tyne, East)

indicated dissent.

Sir Nicholas Bonsor

It is true that most of our export markets, if not all of them, are either in or going into recession. I shall be happy to hear the hon. Gentleman give a list of those countries that he does not think fall into that category. Germany is going into recession. France, Spain, Greece, Australia, Canada and the United States are all in recession. I could give the hon. Gentleman an endless list of countries that are in recession. I look forward to hearing from him a much shorter list of those that are not.

Mr. Enright

Does the hon. Gentleman agree that the task that Germany has performed—first, in taking into its currency that of another country and, secondly, in taking into its confines a backward country while remaining successful—is remarkable and that it is to Germany that we should look rather than to Greece and Portugal?

Sir Nicholas Bonsor

I am happy to join the hon. Gentleman in his tribute to the way in which Germany has dealt with its unification problems. I agree that it is doing a remarkable job. The fact remains, however, that since the Conservatives took office Britain's inflation rate has gone down from being four times the inflation in Germany to being on a par with the inflation in that country, and that is a great achievement which I hope that the hon. Gentleman will have the good grace to approve and acknowledge.

Mr. Enright

Inflation is still higher than it was in the last year of the last Labour Government.

Sir Nicholas Bonsor

I suggest that the hon. Gentleman looks to his books because that is not true. Under the last Labour Government, inflation went up to 27 per cent. If I remember rightly, at the end of 1978 it was around 19 per cent. The hon. Gentleman can check the figures.

Mr. Enright


Sir Nicholas Bonsor

I am sorry, but I shall not continue to give way.

There are two or three matters in the Budget of which I approve. The freezing of increases in the unified business rate will be of great value to small businesses and to businesses generally. I hope that those commercial landlords who seem to be increasing their rents in an unacceptable way in the current economic climate will take a leaf out of the Government's book and follow suit in freezing the rents that they charge.

A business in my constituency has a large insurance company as its landlord and its rent is to increase by about 400 per cent. over a three or four-year period. I sent the insurance company's chairman a copy of the company's accounts to show that if he were to increase the rent in that way it would wipe out the small profit that the business was making, leaving it in grave financial difficulties. I received no satisfactory response and the company insists on putting up the rent. I have no doubt that, as a consequence, the company will go out of business and the insurance company will find itself with empty premises that it cannot let.

Such occurrences are not simply in my constituency —they are much more widespread. It is a matter of profound regret that in many instances commercial landlords are not acting with proper consideration for their tenants and for the economy as a whole but are acting in a way that is greedy and stupid, and that will backfire on them and their revenue in due course.

The VAT threshold is to go up in line with inflation and that is welcome, as is the cutting of the penalties. The penalties for what were quite minor VAT misdemeanours were unacceptably high and I am glad that my right hon. Friend the Chancellor addressed that matter.

I am pleased also that my right hon. Friend dealt with the inheritance tax burden on small businesses. The proposal has been referred to several times and it will be a great comfort to those who have built up small businesses over the years. I declare an interest because I am the non-executive chairman and a smallish shareholder in a small business. I am glad to say that it was one of the 20 fastest-growing companies in this country from 1987 to 1991. The largest shareholder has put an enormous amount of his life's work into the business and I am delighted that my right hon. Friend has made it possible for his family and his children to share in the results of that labour when he retires and, ultimately, dies. Our policy is in stark contrast to that of the Labour party.

I wish to suggest four ways in which I think that my right hon. Friend the Chancellor might go further in his next Budget. The inheritance provisions will be of great benefit to farmers, but while our agriculture is still part of the common agricultural policy and is in an abysmal state not many small farmers will be in a position to benefit from the remission of inheritance tax. Agriculture is dreadfully short of money and most small farmers will go out of business in the near future if nothing is done to assist them. We can do that only by coming out of the CAP or by persuading our European partners to take a more sensible view of the way in which agricultural returns are structured.

I should like to see the Chancellor's proposals to make Government-owned companies pay their small subcontractors promptly extended to other large companies. It is undoubtedly one of the great burdens to any small company's cash flow that large companies use their clout in order not to pay their bills punctually to help their own position. That threatens the future of many small businesses. I hope that the Government will consider following the German example where it is compulsory in a contract to add interest to a bill if an invoice is not settled within 30 days. Firms in Germany cannot contract out of that obligation and large firms cannot use their industrial muscle to wriggle out of paying promptly as they do in this country.

I welcome the proposals on the car tax. As the right hon. Member for Plymouth, Devonport (Dr. Owen) said, a 5 per cent. reduction will cost £600 million, which is expensive. However, it will be of great help to our car industry, which is in grave difficulty, although it is doing remarkably well in the European context. I hope that another 5 per cent. reduction will be announced in the next Budget, if not before.

I am delighted to see that £15 million is to be taken off the betting levy and redirected back into racing.

Mr. David Davis (Booth Ferry)

Hear, hear.

Sir Nicholas Bonsor

I note what my hon. Friend says and I know that that proposal will be widely welcomed. However, the Government could go further. Value added tax, which is payable on the sale of race horses, is another threat to racing. At 17.5 per cent., it is a crippling burden and neither Ireland nor France—our major competitors —charges as much VAT. In France, it is not charged at all and in Ireland it is charged at 2.5 per cent. That being the case, we are not able to compete and I fear for the auctions at New market and our entire racing community, unless the Government act. I hope that they can take some action on VAT on race horses before long.

On the level of the public sector borrowing requirement, the Opposition are trying to have their cake and eat it. They have accused us of having a PSBR which is too high, yet they also accuse us of not spending enough on public services. We will have a PSBR of £28 billion in 1992–93 because of the amount that we spend on public services. The hon. Member for Pontefract and Castleford referred to the hospital which he visited. The Government may not be doing anything in the Budget for the health service but, as the hon. Gentleman knows, the Government increased expenditure on it from £8.5 billion in 1978 to £32.9 billion in 1992—a staggering increase in real terms.

Furthermore, the Government have taken steps to make sure that the money that they provide for the health service is properly and efficiently spent. I visited Harold Wood hospital in my constituency last Friday and was impressed by the way in which the hospital is operating. I asked the same question that I had asked five years ago: "Can you tell me how many blankets and syringes the hospital uses in a year?" The answer was yes and that the hospital had the figures available. Five years ago, the answer was no because the figures were not available and there were no mechanism or auditing controls to enable the hospital to find out the answer. I suspect that the health authority to which the hon Member for Pontefract and Castleford referred is probably Labour controlled and that the hospital does not have enough pillows because it has no proper controls within its structure to ensure that the money allocated to it is spent efficiently.

Mr. Lofthouse

I cannot follow what the hon. Gentleman says about the health authority being Labour controlled. Health authorities are not Labour controlled, nor should they be Conservative controlled. The non-executive directors who run my health authority were appointed by the Secretary of State. They have no affiliation with the area and include a former solicitor from Wetherby and someone who runs a factory 50 miles away. The authority is run by people appointed by the Secretary of State and not by the Labour party.

Sir Nicholas Bonsor

Yes, the hon. Gentleman is quite right. I was out of date, but my point about management administration is valid and I stick by what I said.

The Labour party does not like the Budget. The Leader of the Opposition, when challenged by my right hon. and learned Friend the Chief Secretary to the Treasury, refused to say whether he would reverse the 20p in the pound tax level. However, he promised that we would have the Labour party's alternative budget shortly. I look forward to that with great interest, although we already know much of the detail. The Labour party is committed to putting direct taxation up so that the top level, taken with national insurance, will go up to 59 per cent.

Mr. Nicholas Brown

The hon. Gentleman is misrepresenting our policy. The top rate of taxation will not go up from the present 40 per cent. band. We intend to introduce a new 50 per cent. band that will affect those earning substantially more than £30,000. The hon. Gentleman should not misrepresent our policy.

Sir Nicholas Bonsor

I am grateful for that clarification, but I did not notice that differential in any of the Labour party documents that I read. Perhaps it is a recent change, because I understand that when the changes to direct taxation were first announced, they were set to affect those on £20,500. No doubt the hon. Gentleman will correct me if I am wrong and will tell us about the proposed level later.

The fact remains that the top rate of tax will be 59 per cent. and on top of that investment income will, yet again, suffer another surcharge of a further 9 per cent. Therefore, the top rate of tax on investment income will be 68 per cent. That is what the Labour party would introduce as soon as it came to power. Heaven knows what the top rate would be if it were in power for four years; we could even go back to the level reached in 1977 under the previous Labour Government when the top rate of tax payable reached 98 per cent.

We all know about the budgetary aims of the Labour party. It is determined to kill wealth. It does not like the idea of accumulated wealth and of family businesses being passed on from one generation to another. That is why it intends to increase inheritance tax and to bring back capital transfer tax. The hon. Member for Newcastle upon Tyne, East (Mr. Brown) may make a face and I certainly agree with the sentiment that he expresses. I am merely repeating exactly what was said in published Labour party documents.

Are we to believe that the hon. Gentleman agrees with the Conservative Government's policy of cutting inheritance tax on small businesses? If so, will he please give us his support so that we can go ahead on an all-party basis? I am sure that small businesses would be mightily relieved were that to happen. Given the fact that the Labour party has adopted such an idiotic line and we are close to an election, there is, perhaps, the faint possibility that we shall be able to squeeze some sensible accommodation out of it.

Conservative Members believe in enterprise. We believe in people being able to work for their living and to keep as much of the money that they make as is compatible with proper funding of the state's economy. On the Opposition Benches, there is a dogmatic socialism that should have died years ago: Opposition Members wish to stifle industry and enterprise and to take money from everyone who manages to accumulate it, without letting them spend that money on their families or build something for future generations.

That is the difference between the two parties. That is why the country will vote for the Conservatives, and why the present Government will remain in power after the next election.

8.8 pm

Dr. Norman A. Godman (Greenock and Port Glasgow)

I profoundly disagree with what has been said by the hon. Member for Upminster (Sir N. Bonsor), except in one important respect. He mentioned his hon. Friend the Member for Windsor and Maidenhead (Sir A. Glyn). I share his affection and respect for the hon. Gentleman, who, in my experience, has always been a fair-minded adversary of the most courteous kind.

Earlier, the hon. Member for Halesowen and Stourbridge (Sir J. Stokes)—that splendid English patriot—claimed that he was speaking for England, and, more particularly, for his constituency. That claim seems reasonable enough, on the basis of the speeches that the hon. Gentleman has made over the past nine years. I listened closely, as I always do, to his unashamedly patriotic speech. He was followed by my old and hon. Friend the Member for Newport, East (Mr. Hughes), who said that he was speaking for Wales. I should like to speak for the people of Scotland—and, more particularly, for those whom I represent in Greenock and Port Glasgow.

I see that the Parliamentary Under-Secretary for Social Security is present. I wish to say something about the social fund later, but I should be enormously grateful if —with her characteristic courtesy—she responded promptly to the following question. How much of the increase in the social fund will reach the two local offices in my constituency? As the hon. Lady knows, about a third of the people whom I represent are in receipt, directly or indirectly, of social security incomes. This is not a joke; I am not being facetious, but making an important point. Today's Budget has nothing to offer my constituents. Perhaps, however, the Minister's reply—which, as always, will be expeditious and courteous—will answer my question about the social fund.

The Parliamentary Under-Secretary of State for Social Security (Miss Ann Widdecombe)

Obviously, I cannot answer the detailed question about the proportion of the social fund, but I shall certainly undertake that either my right hon. Friend the Minister of State or I will write to the hon. Gentleman.

The hon. Gentleman says that this is not a Budget for his constituents. What about the help that it will give his poorer pensioners?

Dr. Godman

I am grateful to the Minister for responding in such a way. Yes, I will state the ways in which the Budget will help; but, in overall terms, it does nothing for the people of Scotland—at a time when the Minister's party is in a minority there, and faces elimination in terms of representation in the House. I believe that the Secretary of State will go at the general election, and that the hon. Member for Stirling (Mr. Forsyth)—the Minister of State. Scottish Office—may go as well. That may cause all kinds of problems for the governance of Scotland, but the Budget has been introduced at what is already a time of considerable political turbulence there.

I welcome the assistance that is to be given to small firms, especially in regard to the disgraceful companies that take their time in paying bills to smaller companies. If the proposed sanctions sorted out those miscreants, I should be delighted. On a number of occasions, representatives of small businesses have come to my surgeries to complain about the slowness of large companies in paying their bills. That has created all sorts of cash-flow problems.

I have always recognised and acknowledged the importance of small businesses, particularly in my constituency. I am a cinema buff: I was brought up on American-type films, with Doris Day singing "Blue Moon" and what have you. Given that background, I welcome the financial assistance that is to be given—belatedly—to the film industry. I refer to paragraph 4.15 of the Budget report, on page 46.

The United Kingdom film industry includes in its ranks some very fine, talented writers, producers, directors and actors, and we in Scotland have more than our fair share of talented film makers. As a cinema buff, I welcome the support that is to be given to the industry, although it has come so late in the day.

There are no car factories within hundreds of miles of my constituency; nevertheless, I welcome the measures in paragraph 4.19. None of my constituents now work in the car industry: Chrysler disappeared from Renfrew a long time ago. All the same, I am sure that this is an important measure for the United Kingdom's economy.

In one respect, however, my view differs sharply from that of the Government—and, perhaps, even from that of some of my hon. Friends. I refer to the increase in alcohol duties. According to paragraph 4.21, that increase is about 4.5 per cent. and I think that it should be much higher.

We talk about drug addiction in the United Kingdom. I can tell the House that one of the major forms of drug addiction in my part of Scotland is alcohol addiction. I hope that I do not sound too much like a whinger, but I feel that alcohol is much too cheap, and I think that the duty on it should have been increased by a much larger amount. Alcohol-related crime is on the increase in Strathclyde—and elsewhere in the United Kingdom; there is nothing special about Strathclyde in that regard. Many violent crimes are alcohol-related, especially those committed at weekends and involving the use of knives and other weapons. I do not think that enough is being done to deal with that form of addiction, and I think that the prices of drink should be much higher.

I also think that the increase in duty on cigarettes is not enough, at 10 per cent. Cigarettes should be more expensive, given the problems that affect those who are addicted to them. We need only visit hospitals to see those problems: emphysema, lung cancer and other smoking-related illnesses. A savage increase in duty may not be the whole answer, but a dramatic increase in the price of both alcohol and cigarettes would help.

I said that the Budget has been introduced largely as a way of saving the Government's neck, but it will certainly not be saved in Scotland. There, the Conservative party is a declining minority party—it is now the third party in Scotland, coming after the Liberal Democrats. This is indeed a politically turbulent moment in Scotland, and despite some of the kind things that I have said about it and despite the intervention by the Under-Secretary of State for Social Security, the hon. Member for Maidstone (Miss Widdecombe), the Budget will not help the Conservative party in Scotland. I shall spell out the reasons in a moment.

One element of the turbulence in Scotland is that the power of this place is suffering a continuing diminution vis-a-vis the extraordinarily powerful central institutions of the European Community, the Council of Ministers and the Commission. Its power has also been diminished by the over-powerful Executive, but let us bring the debate back to Scotland.

As a Member of Parliament for Scotland, I know that we are experiencing growing disenchantment with the Government and the Westminster Parliament. It is fair to say that the Scottish Tory party has lost the place. The Budget will strengthen the growing alienation from what is known as the London Government.

Yesterday I discussed the Budget—among other things —with youngsters at a school in Gourock just over the border from my constituency. The school is in fact in the constituency of my hon. Friend the Member for Renfrew, West and Inverclyde (Mr. Graham) but most of its pupils are constituents of mine. My wife and I spent a couple of hours at the school and discussed the Budget with youngsters who asked me what would be done for the unemployed people in my constituency and for those living in appalling housing conditions. The answer is nothing. There is nothing in the Budget for the thousands of my constituents caught up in those terrible circumstances.

What is to happen to the unemployed in my constituency where the unemployment rate is now just under 13 per cent.? What comfort can they take from the Budget? I have to say, very little. People in my constituency are implementing the traditional Scottish solution to unemployment which is migration. Some highly skilled constituents are now working on sites in Spain, in shipyards in Holland and even further afield. They have been driven away from their homes, and there is nothing in the Budget to bring them back.

What about people living in appalling housing conditions? What do they gain from the Budget? Why have not the Government given any help to the construction industry by encouraging district councils in Scotland and local councils south of the border to build the houses that are desperately needed not only by the many thousands of homeless people in Scotland but by the scores of thousands living in disgraceful conditions? There is nothing in the Budget for those thousands of people, and they will wreak their revenge on the Government on 9 April if that is to be the date of the general election. They will ensure that the growing campaign to drive out the Tories from Scotland—largely inspired by the campaign for a Scottish assembly—reaches fruition on 9 April.

Yesterday the Secretary of State for Scotland published a document in which he claimed that there were many financial benefits accruing to Scotland from the Union. There are few in the Budget. The Secretary of State chose to ignore the fact that Scotland's gross domestic product has now fallen to 93.2 per cent. of the United Kingdom average, having risen to 97.4 per cent. in 1984. This morning's edition of The Herald—it is no longer called The Glasgow Herald—stated: Mr. Lang cannot have it both ways. Are we doing as well as he likes to tell us? Or are we a poor country which would be much poorer without English bounty? Scotland's GDP is slipping behind. There is a great deal of poverty in Scotland and the Government, who are known increasingly as the English or the London Government—

Mr. Peter Hardy (Wentworth)

The south-east Government.

Dr. Godman

Behind their stockade in the south-east the Government are generating a great deal of disenchantment and alienation in Scotland, but it does not appear to concern them greatly. Let us be honest and acknowledge that we are in a desperately tight race for the election. Anyone who says that his or her party will win by 30 or 40 seats is appallingly disingenuous, dishonest or stupid. I believe that it will be a very tight race.

My constituents have to tolerate dilapidated schools such as the Roman Catholic school that I visited yesterday just over the border in Gourock. My wife and I met some very fine, intelligent young people there but, walking up the stairs from the ground floor to the first floor, we had to dodge the pails and buckets that were gathering water from leaks in the roof. It was a characteristically wet day in western Scotland.

Mr. Hardy

It always is.

Dr. Godman

Not always; we sometimes have very fine weather in the west of Scotland. The youngsters have come to accept that their education takes place in such disgraceful conditions. What help is given in the Budget by way of a new build programme or a programme of repairs for such decaying, deteriorating schools?

The crime figures in my constituency seem to be going through the roof. Only the other day, three men were gaoled for a total of 24 years for an armed robbery in Greenock. Much more violent crime is committed these days. I suspect that one of the reasons is the deadening influence of endemic unemployment in the area. However, another reason is that there are too few police officers on the streets of Greenock and Port Glasgow.

Chief Superintendent Laurence Macintyre, the divisional commander of X division of Strathclyde police, tells me that he is at least 10 officers short of the minimum requirement. The overtime requirement has been chopped by 4,000 hours, so there are fewer police officers on the streets. Therefore, street crime in particular and crime involving drugs is on the increase. What support are the Government giving in the Budget for dealing with the deeply worrying increase in the crime statistics?

I told the Minister that thousands of my constituents are on social security. That is inevitably the case with a 13 per cent. unemployment rate. Many are on income support because they have exhausted their unemployment benefit. There are many pensioners because it is an aging population—the young people have been driven away by unemployment. Much more needs to be done for such people, especially those on income support and the unemployed.

It is not so long ago that 300 to 400 male school leavers in my constituency were given apprenticeships in the local shipyards and in the marine engineering works. That figure is now down to between 12 and 16. That is a scandalous decrease.

I mentioned earlier that I had spoken to schoolchildren aged 16 or 17 who told me that to them the Government had betrayed them and their families in failing to provide employment and decent houses in the district. For many of them the only answer was nationalism and independence. They felt that an independent Scottish Government would provide the right sort of Budgets for them and their families. I naturally sought to dissuade them from that fantastic belief.

When I see homelessness, visit people who live in damp homes, and speak to unemployed people and people on social security incomes—a sizeable number in my constituency—I can well understand why there is growing alienation from the London Government. If anything, today's Budget will strengthen that alienation. I look forward to a Labour Government who, among other things, will create a Scottish Parliament in the capital city of my country.

8.20 pm
Mr. Gary Waller (Keighley)

Whatever the electoral considerations referred to by the hon. Member for Greenock and Port Glasgow (Dr. Godman), I assume that you, Madam Deputy Speaker, will still be a Member of this House in the new Parliament. For me there cannot be too many Yorkshiremen and Yorkshirewomen in the House. Therefore, regardless of any party differences, I look in that sense to your return.

I had hoped that I might be called while your colleague the right hon. Member for Woodspring (Sir P. Dean) was in the Chair, if only so that I could refer to the great friendship, kindness and courtesy with which he has always treated me and other hon. Members. Of course, similar considerations apply to Mr. Speaker, whom we shall also greatly miss. I hope that you will be able to pass on to your colleagues, Mr. Deputy Speaker and Mr. Speaker, our feelings of regret at their departure from the House and our good wishes for their future retirement.

A highlight of the debate so far was the speech by the right hon. Member for Plymouth, Devonport (Dr. Owen). As always, his comments were extremely thoughtful. His departure will also be a considerable loss to the House. He spoke of the need for prudence at this time. Judging by what he said, the Budget as presented this afternoon complied with the requirement that he set out. It was certainly an imaginative Budget. It dealt with the short-and medium-term problems of recession, but at the same time it did not introduce short-term measures or gimmicks to give an artificial stimulus to the economy. I am sure that the Budget is all the better for that.

When I listened to the speech of the Leader of the Opposition, which followed that of my right hon. Friend the Chancellor, it seemed that the right hon. Gentleman found himself in some difficulty. We asked whether he supported or opposed the measures in the Budget. I have to say that when he sat down I did not know whether he supported them or not. But perhaps we shall find out more in the days to come.

The Budget was certainly a Budget for recovery. Therefore, inevitably it had to be a Budget for business and industry and especially for small businesses. It is worth remembering that since the present Government came into office in 1979 more than 1 million people have become self-employed. I am sure that there will be considerable relief among many who saw or heard the contents of the Budget as they became apparent today.

The fairer treatment of value added tax will be counted as a great advance by many. The penalty regime was resented by many small business people. They felt that any minor error was treated on the same basis as a major breach. I hope that in future that will no longer be the case. I know of many small shopkeepers and other small business men who have had sleepless nights because they made a minor error and felt that they were treated as criminals. They, too, will welcome the change in inheritance tax and the increase in the relief for business assets from 50 to 100 per cent. I am sure that they, too, hope for the return of a Conservative Administration.

No one should underestimate the importance of the announcement on the uniform business rate. The change to the UBR that came about recently is often confused with the effects of the revaluation that occurred simultaneously. Listening to the hon. Member for Hemsworth (Mr. Enright), it was clear that he was confused about those two factors. He decried the impact of the uniform business rate on small businesses. Of course, there can be no doubt that the UBR as such was a great benefit to small businesses because by statute any increases are linked to inflation.

The revaluation caused enormous anxiety and was a great blow to many firms simply because it had been postponed for up to 17 years after the previous revaluation. When the increases came about they were an enormous shock. When my right hon. Friend the Chancellor announced his cap on increases in 1993 I was worried for a moment because people in manufacturing industry in the north of England have felt for a long time that they had already suffered a comparative disadvantage for far too long as a result of the delayed revaluation. But my right hon. Friend the Chancellor quickly demonstrated that he had taken that point on board by announcing that the gainers would receive their full benefit more quickly. Many retail and commercial premises in West Yorkshire, which lost out as a result of the revaluation, will also benefit from the UBR cap. So they will share in the benefits implied by my right hon. Friend's announcement.

The dramatic reduction in the special car tax was by any account a bold step. I hoped that there would be a reduction but had not anticipated that it would be so large. I am delighted that my right hon. Friend the Member for Birmingham, Northfield (Mr. King) has come into the Chamber. Only recently he became chairman of the all-party motor industry group. It is a remarkable tribute to his leadership that after only a few weeks he has prevailed on my right hon. Friend the Chancellor to make such a dramatic reduction, which will reduce the average price of new cars by about £450. I have no doubt that that will provide a great stimulus to the British motor industry and that the benefits will percolate through to the many firms that are linked with that industry.

For instance, the machine tool sector, which is well represented in my constituency, and the component industry will certainly welcome the change and the stimulus that it will give to the British motor car industry. There will undoubtedly be enormous benefits in future. Environmentally, it is an extremely beneficial move because it will encourage the replacement of old cars by new environmentally green vehicles. I am sure that that point was not far from my right hon. Friend's thoughts, bearing in mind the great importance which the Government attach to environmental issues.

The centrepiece of the Budget is the new lower rate income tax band. There was some opposition to an income tax cut from many of my constituents who made representations about the Budget. They said that there should not be a straight cut because it would benefit wealthier people. In response, I pointed out that it depended on how any reduction in income tax was distributed. Of course, I am delighted that the formula that my right hon. Friend the Chancellor has adopted will direct the most assistance to low-earners. That measure has left the Opposition hypnotised. They do not know whether to support or oppose it. Certainly, if they oppose it, it will demonstrate to all that Labour is the party of high taxation.

I greatly welcome the improvement in the rules for personal equity plans. From April, people will be able to invest up to the full £6,000 in qualifying investment and unit trusts. Like my hon. Friend the Member for Cambridgeshire, South-West (Sir A. Grant), I have long had a great interest in the wider share ownership movement and the Wider Share Ownership Council in particular. One of the most significant changes that have taken place under the Government is the great increase in the number of shareholders. I am delighted that the Wider Share Ownership Council has been given a new lease of life as the Share Ownership Movement with considerably enhanced resources.

Although the ideal must be a wider share-owning democracy, whether people own shares in their own companies—one hopes that in future Budgets one will see even more encouragement for share ownership in the companies for which people work, as I have no doubt that that produces great benefits for such companies and for the economy generally—or whether people own shares in British industry generally, for many people investment in unit trusts and investment trusts represents a first step into share holding; it is a better vehicle for many small savers. Therefore, I hope that my right hon. Friend's announcement on PEPs will provide a stimulus to savings and encourage the wider share-owning democracy that we wish to see.

The Budget will also help charities and voluntary giving. There were many representations about the need for VAT reliefs to help charities. It is difficult for my right hon. Friend the Chancellor to take big steps in that direction, but some extensions to VAT reliefs have been announced. That the minimum gift to attract tax relief will be reduced will also be of benefit in stimulating charitable giving.

My right hon. Friend the Chancellor also spoke of the importance of GATT. I share his concern to the utmost. Many industries, not least the textile industry, which employs many people in my constituency, have great anxiety that a failure to bring about an early agreement on GATT could lead to a stultification of trade and to increased protectionism. Of course, that threat is greater when electoral considerations in the United States are so significant.

The Budget will be of great value to the country. As I left the Chamber earlier, I overheard an Opposition Member say to another, "We've lost." Who knows? He was a northern Member and he recognised the impact of the Budget in the north of England. The Budget is good not only for the country but for the Chancellor and for the Government. I look forward to supporting it in the next Parliament.

8.35 pm
Mr. John Browne (Winchester)

I pay tribute to my hon. Friend the Member for Windsor and Maidenhead (Sir A. Glyn). Since I have been in the House, for just under 13 years, he has always been a marvellous character and certainly a great and friendly adviser to me. I know his constituency reasonably well and I am very sure that his constituents will miss him greatly. I would also like to echo the feelings of other hon. Members who have expressed their kind sentiments of thanks and a fond farewell to Mr. Speaker and to Mr. Deputy Speaker. I should be grateful, Madam Deputy Speaker, if you would convey those thoughts for me, and wish them great happiness in their retirement from this House.

I declare an interest, as detailed in the registry.

Today, it is almost trite to say that we are in difficult economic times. It is a very difficult situation for any Chancellor in which to construct a Budget. My right hon. Friend the Chancellor has constructed an extremely clever Budget—so clever that, if I were a Labour Member or a Liberal Democrat Member, I frankly would find it very difficult to do anything but vote for the Budget. I certainly would find it impossible to vote against the Budget. We have yet to see when the Divisions take place, but I would be not too amazed if, for the first time for many decades, we had a Budget that was not voted against. It is a Budget for the country as a whole, and is particularly targeted towards those in need.

As I said, it is a clever Budget. I think that it is also a very prudent Budget. My only criticism of it is that I think that it is perhaps too prudent in the circumstances.

May I welcome the bringing together of the Budget and the autumn statement? This is a structural matter of procedures. I believe that it is long overdue and very welcome, and I thank my right hon. Friend the Chancellor for that initiative.

In the short term, the Budget will be greatly to the benefit of many of my constituents in Winchester, and in Alton, as it is to the constituents of almost every Member of this House.

The 20p tax band was brilliant. Many Members on both sides of the House have been pressing my right hon. Friend for a 1p cut in the basic rate of tax, which would have amounted to a loss of revenue of very nearly the same as the revenue that we will lose through the creation of the 20p band.

This effectively targeted tax cuts towards the lower paid, towards the young, towards those people in their first job and towards women in work. It is a brilliant initiative. From where I was sitting, I thought that I could see the wind vanish from Opposition Members' chests. I really think that the wind was taken out of their sails. It was a tremendous coup. It was a great thing to do, and I congratulate very warmly my right hon. Friend the Chancellor. As the effects flow through, I urge my right hon. Friend to ensure that the benefits targeted to the lower paid are not clawed back by the rules on income support regarding net income.

The extra help targeted on pensioners is very welcome and worthwhile.

Almost every type of farm is experiencing, not just difficult times, but horrific times, often through no fault of the farmers involved. When we were down to eight days of food in the second world war, we pushed farming. Farmers became the darlings of our nation. They were encouraged to produce and produce, and to borrow to obtain more from the land. They did so in a fantastic, entrepreneurial way and were highly successful. Due to our membership of the European Community and the resulting structural change of our agriculture, the farmers were asked to rein back, and experienced great difficulties. Farmers in my constituency are particularly worried now at some of the proposals of Commissioner MacSharry. I think that they will greatly welcome my right hon. Friend's announcements on inheritance tax.

My right hon. Friend's proposals for small businesses were welcome. I speak as a past chairman of the Conservative Back-Bench committee on smaller businesses. The proposals on inheritance tax are important for small businesses, entrepreneurship and venture capital. The announcements on the uniform business rate were welcome, and will greatly benefit small businesses and shops. The new rules for the late payment of bills by big companies, which are the customers of small businesses, are an excellent initiative. My right hon. Friend used just the right sort of clout to support the proposal. He did not put it in legal terms, from which there are ways out, but said that if a company wins a Government contract it must ensure that it pays its bills to small businesses on time, which is excellent.

The raising of the VAT thresholds will benefit small businesses. I welcome the fact that there is no change in the VAT rate, and the cutting of severe penalties for those guilty of minor misdemeanours.

The film industry of our country used to be a great industry. It is because we have not been sensitive enough to that industry's needs that we have seen it flow back to Hollywood and many other countries. It is a culturally important industry as British films are seen throughout the world. The explosion in television and television software and the huge increase in film making make my right hon. Friend's proposals even more important and most welcome. It is realistic to have tax relief on pre-production costs, which are incurred many months or even years before the earnings from released films arrive. The delay in earnings should be taken into account and should be tax deductible as costs are incurred. I welcome my right hon. Friend's initiative.

Cider makers, certainly those in the west country, will be relieved that they have escaped from the proposed threat of the European Community to impose greatly increased duty on cider.

Whisky makers will be upset at the rise in duty, but 70 per cent. of their production and, I should imagine, a larger percentage of their profits derive from exports. Consequently, the rise in whisky duty will not affect the earnings of that industry too much.

I welcome the 50 per cent. cut in the discriminatory tax on motor cars. I would have supported a 100 per cent. abolition of the tax, which I think is totally discriminatory, but I welcome the 50 per cent. that we have been given. It will help the economy as the motor industry is an important multiplier industry with various supporting industries such as rubber tyre, battery, electrical, plastics and paint. All will benefit from the reduction.

One factor that I would have liked to have been included in the Budget, and which I was upset not to see, was tax deductibility for childminders. If a company is allowed a tax deduction for a creche for children, individuals who pay for childminders—particularly those who are unable to get their children to their place of work on crowded trains and undergrounds—should be given tax deductions. That was a reasonable request and I am sorry that it was not included in the Budget.

All those measures will help my constituents and those of almost every hon. Member. Therefore, I thank my right hon. Friend the Chancellor.

The economy in general affects us all. Quite rightly, inflation has been seen as the number one economic priority of the Government during the past 12 years or more. It is stil a most important priority, but it is falling fast and is, to some extent, yesterday's problem. I know that there is an inherent risk of a resurgence, but I believe that it is yesterday's problem and that today's number one priority for the Government should be the recession.

We are undergoing a severe recession—the worst in living memory. If it had not been a rolling recession, affecting one industry after another, instead of happening to all industries at once, as happened in the 1920s and 1930s, I think that it would be much worse than it is now. However, I believe that it is bad, very bad, and have urged my opinion on the Government for the past 18 months. I urge my hon. Friend the Minister to convey to my right hon. Friend the Chancellor that the recession is today's problem. If we do not solve it, tomorrow's problem will be an economic depression, and Germany, our main competitor, will be the country best placed to pick up the pieces.

We are in a deep recession, for which the classic remedy is to lower, not just interest rates, but the most important interest rates: real interest rates—nominal interest rates less inflation. Nominal interest rates are coming down, but inflation is coming down faster. Therefore, real interest rates are not only high but rising. We tolerate not only high, but rising, real interest rates. We have a serious economic problem, and risk turning severe recession into economic depression. We are doing so by placing yesterday's top priority—inflation, which is falling fast—ahead of today's top priority—recession.

How does that happen? It stems from our membership of the exchange rate mechanism, which I voted against. I believe that we joined the exchange rate mechanism for the wrong reasons, and at the wrong time—too soon. We joined it before the economies that underlie all those paper currencies had converged sufficiently. Therefore, we have an exchange rate mechanism that is not for gold, silver, or currencies of intrinsic value, but paper currencies with no intrinsic value, which merely represent a collection of economies.

The exchange rate mechanism for those paper economies represents economies that were out of phase with each other and had not converged. If they had, we could have built an exchange rate mechanism and perhaps allowed a single currency to evolve.

We entered the mechanism too soon and for the wrong reasons, and, as a result, United Kingdom interest rates do not respond to the cries of the British economy. Our economy is crying out for lower real interest rates, not just lower nominal rates, which are peripheral. Our interest rates are not responding as they are dictated through the exchange rate mechanism, by the needs of the German economy. Unfortunately, the outlook for the German economy is for continued high, and even rising, real rates of interest. The Germans have to deal with the understandable inflation that is the consequence of absorbing East Germany. But it is not merely a temporary but a structural problem.

Historically, the United Kingdom economy has been based on internally generated growth—on low or even negative rates of real interest, and on a tolerance of inflation to protect jobs. Today, through the exchange rate mechanism, we are trying to change our structure to meet the requirements of an entirely different economy.

The pattern of growth in the German economy was almost the exact opposite. It was externally generated. The German economy had high real rates of interest, and inflation was not tolerated on any account.

The United Kingdom is confronted by a major structural problem at a time of national and international recession. The exchange rate mechanism magnifies that economic agony.

I accept that it is good for the United Kingdom economy to have the economic discipline that goes with the ERM, but our economy is still in a state of economic convalescence after some 35 years of socialism. When applying what might be good economic medicine, we must be careful not to kill the patient by giving him too much medicine at once.

We must avoid allowing the ERM to drive us from recession into economic depression. That is why I voted against the ERM, and why I am still against it. That is why I was saddened to hear that my right hon. Friend the Chancellor is getting even further into the ERM by announcing that he intends in future to move from the broad to the narrow band.

The Budget serves as a prudent incentive. It offers tax cuts that are sustainable in the long term, which is very laudable. It is like pressing lightly and prudently on the accelerator of a stationary car. Some may feel that the accelerator is not that prudent, given a borrowing requirement of £28 billion, but that is open to argument. Let us give my right hon. Friend the Chancellor the benefit of the doubt and say that he is prudently pressing on the accelerator. The problem is that the brake of high and rising real rates of interest is still on. The risk is that the car will stall. In economic terms, that stall means changing from severe recession to economic depression.

I congratulate my right hon. Friend the Chancellor on what I truly believe to be a very clever Budget. It is so clever that I would find it hard to vote against it. One might even find right hon. and hon. Members in all parts of the House voting for my right hon. Friend's Budget; that would be a real political achievement. However, I am not alone among my right hon. and hon. Friends in fearing the effects of the ERM and of rising real rates of interest on the United Kingdom economy. I urge my right hon. Friend, even at this late stage, to re-examine that aspect in the hope that our economic car will not stall.

8.52 pm
Mr. Peter Hardy (Wentworth)

I have tried for some weeks to catch Mr. Speaker's eye during Prime Minister's Question Time, because I wanted to ask the right hon. Gentleman something of fundamental importance. Unfortunately, I did not succeed, so I might as well put my question to the House now.

When the Government first took office in 1979, the United Kingdom was—according to its gross national product, and to the Organisation for Economic Co-operation and Development and other reputable authorities—the fifth richest nation in the world. When the Conservatives leave office next month, the United Kingdom will be the 10th richest country in the world. It has fallen five places because it has experienced comparative decline. That ought to transcend party political differences. The severity of the situation can be seen in all our constituencies. It can be seen in the young people who are without skills and opportunities. It can be seen in the rising crime rate, the problems of the health service, and the difficulties facing our schools.

I hope that any politician and any British citizen would judge a Budget on whether or not it arrests the decline that has been inflicted on this country for the last 12 or 13 years. Unfortunately, today's Budget will do very little to stem that decline.

I was surprised that a Yorkshire Member of Parliament, the hon. Member for Keighley (Mr. Waller), could perceive advantages in the Budget. The City might perceive its advantages, but in those areas where there is a need to create wealth the Budget is largely irrelevant. It scatters concessions about like confetti at a shotgun wedding, and they are of little significance.

Despite the Budget's welcome concessions to pensioners, it does not address basic problems. What have the Government done for youth, the nation's future, and investment? What does the Budget do to remedy the grievous economic conditions that exist in Britain today? Whatever the Government may say before the general election, the Chancellor admits that the public sector borrowing requirement will total £29 billion. The Government do not have that money. Over the past 13 years, they have demonstrated beyond all doubt that they are unfit to exercise stewardship of the nation's economy.

Since the Government took office, they have received £111,000 million in offshore oil revenue, and scores of billions of pounds from privatisation. What is there to show for that money? Fiddled employment statistics.

Yesterday, I gave my local press a story about a 12½ year-old-child whose whole education and social life is blighted because she cannot have an operation. Her mother, who is a very decent lone parent, does not have £900 to pay for that operation. The Government had all that loot from privatisation—all that wealth from North sea oil—and yet still injustices of that kind arise.

I have been drawing another problem in my constituency to the Government's attention for months. I refer to the future of one of Britain's most important industries. The hon. Member for Keighley fought my constituency some time ago, and will be aware of the vital importance and achievements of its engineering steel industry. It is capable of competing with any similar industrial establishment in the world. It holds world production records and can knock Germany, France, Italy, the United States and even Japan into a cocked hat in producing high-quality engineering steels.

As a result of Government policy, it cannot work full time because the privatised electricity industry has put extra premiums on evening use, for under the Conservatives the values of the television soap opera are more important than the creation of wealth. This industry in my constituency in the last two years has faced huge increases in electricity charges.

The Government say that the industry has the power of the consumer. But it is the biggest consumer of electricity in the Yorkshire region. That does not seem to weigh heavily on a Government and a supply industry that are no longer concerned about exports, about the creation of wealth and about the preservation of the industrial base. The Government have given industry no priority, and there is no priority in the Budget.

When the Government were giving out revenue support for local authorities, I did not think they were being fair and, about 18 months ago, I made speeches in the House on the subject. Since then, I have analysed the position in my local authority and compared it with the two, well trumpeted Tory favourites of Westminster and Wandsworth. In this financial year, the borough of Westminster received £911 per head by way of revenue support. The borough of Rotherham received £211.

The most expensive item for local authorities is education, and in my part of the world the school population is nearly twice that of Westminster, yet the latter received five times as much as Rotherham in revenue support. Had Rotherham been treated on the same basis, not only would we have had no poll tax to pay, but every man, woman and child in the Rotherham Westworth and Rother Valley constituencies could have received £750. That would have been stupid, of course, because the money would have been better invested.

We in Britain are not investing in the creation of wealth. There is nothing in the Budget, for example, about one of the most serious problems facing Britain. In the late 1970s, my area had virtually beaten the housing problem. Now, because of the sale of council houses and particularly because of the enormous reduction in local authority house building, we are in a sorry state. Local authority housing is the only hope for half the population of the country who cannot afford to buy.

Since the late 1970s, 20,000 names have gone on to the waiting lists in my area. The only hope for those people is for the local authority to get on with building. It has the capital to do that, but the receipts from council house sales have been frozen. Had the Government really wanted to stimulate the economy in an area such as mine—which, in housing, is suffering enormous problems; the people generally have suffered economic devastation as a result of Conservative de-industrialisation policy—they would have allowed that stimulus, brought hope, and thereby reduced the queues of people attending the surgeries of councillors and Members of Parliament.

Mr. Lofthouse

Is my hon. Friend aware that in parts of Wakefield metropolitan district council in 1979 people were waiting only a fortnight for council tenancies? Since then, no bricks have been laid by the local authority and half the council houses have been sold. Day after day I hear at my surgery, and receive in the post, heartbreaking stories of people, including young couples with babes in arms, with nowhere to live. In many cases couples are having to live apart with parents and relatives. As my hon. Friend says, millions of pounds are being held in capital receipts as a result of council house sales. If councils could use that money, much of the problem would be solved.

Mr. Hardy

My hon. Friend is right. The Government have done virtually nothing to tackle the real problems of Britain. If they were prepared to tackle them, we would have had a different Budget today. Indeed, had we had more sensible Budgets during the years of Tory rule, the national economy would be much healthier. Whatever the Chancellor may say or do, and irrespective of any sensible little concessions that he may introduce, Britain's economy is unhealthy and may even be dismissed, and the Government's policies are fundamentally flawed and irrelevant.

I am sorry that my hon. Friend the Member for Greenock and Port Glasgow (Dr. Godman) is no longer here but he has another important engagement. In his speech he referred to several matters that he would have liked the Chancellor to have approached more severely. I am not particularly severe on those matters. For example, I recognise that old men who have smoked from the age of 12 or 13 and may not be particularly rich may find it difficult to pay the extra charge on tobacco and cigarettes. It is not up to a well-heeled Tory Chancellor to try to make it impossible for people who have smoked since boyhood to give up whether they want to or not, simply because they cannot pay. That is a brutal approach, and it is not a question which the Chancellor should determine. Moreover, an important establishment in my constituency provides 130 jobs and I should not like those to disappear because my constituency has lost too many jobs already since the Government have been in office.

Some Conservative Members have said that the price of drink should be increased. I am not a drinker—I am not teetotal but I do not drink at work. I have been in the House for 22 years and the only drink that I have consumed here has been when I have had guests for meals, so I am not an ardent advocate for the cause of drink. If the Government wanted to do something sensible about drink, they would not price it out of the market but would have challenged and changed the unsatisfactory character of the British drinks industry. They will not do that, however, because they depend too much on the brewers' donations to fight elections on their behalf.

My hon. Friend the Member for Greenock and Port Glasgow and the hon. Member for Keighley mentioned the Government's wonderful decision to promote green motor cars and have us all buying new cars that burn unleaded petrol. The problem is that vast numbers of my constituents cannot afford to buy a new car and are stuck with their four-star-consuming cars. The assumption that millions of our constituents can join every fashion that the Government espouse is nonsense. My constituents cannot afford to change their cars or buy private medicine. They have to put up with run-down public services and an economy that has been badly brought down by a Government who have failed to perceive the real necessities of Britain's present economic condition, who have failed to secure investment to guarantee the future of young people, and who now believe that, by scattering a few bits of confetti here and there, Britain will feel that it is having a happy marriage.

We are about to see a change. That has become necessary because the Government have failed the country. They have led and created an appalling and serious decline—the worst that this nation has experienced in recorded history. We talk heatedly about the problem of the enormous increase in crime. But the biggest crime of all has been the Government's incompetent failures and inadequate leadership in the past 13 years. The fact that the days of their domination are rapidly drawing to a close is much to be welcomed.

9.7 pm

Mr. Mark Wolfson (Sevenoaks)

The hon. Member for Wentworth (Mr. Hardy) will not be surprised to hear that I do not share his feelings of doom and gloom about the condition of Britain today—quite the reverse.

May I take up two points that the hon. Gentleman raised? First, what steps has his local authority taken to involve and encourage the development of housing for rent through housing associations? That has happened successfully in many parts of the country and I am surprised that it has not happened in his constituency. That may be due to the baleful influence of his local authority, which does not consider that housing associations are a way forward. Secondly, although I appreciate the hon. Gentleman's eloquent concern for those who have smoked all their lives and the higher prices that they may have to pay for tobacco, I thought that there was a consensus in the House that it was right to use the tax regime to discourage smoking. The health hazards of smoking are well-known, so the hon. Gentleman's argument does not stand up. He seemed to be strongly opposing the cross-party consensus on smoking and health.

Mr. Hardy

I would not dissent from the view that we should discourage young people from smoking. My point was—at the risk of being a little chauvinist—that older men who may have smoked from the age of 14 and who are now in their 70s and 80s think that a pipe of baccy is rather important, and it would be cruel of the Government if they told a poor man that he had to stop smoking simply because he could no longer afford the tobacco on which he had come to depend.

Mr. Wolfson

Be that as it may, I should like to speak about the Budget now.

I welcome the general thrust of my right hon. Friend the Chancellor's statement, and I fully support the Government's continuing central objective of defeating inflation and achieving a sustainable growth rate in the economy. This ingenious Budget is consistent with Government policies over many years. Not surprisingly, my hon. Friend the Member for Winchester (Mr. Browne) spoke strongly against our membership of the ERM, but I find such opposition to membership odd.

For a long time, Governments of various political complexions have been too ready to pump up or to depress the economy for domestic reasons instead of paying attention to the underlying strength of the economy and the importance of a sustainable and consistent interest rate policy. The ERM certainly provides an additional limitation within which Governments have to work, but it is a necessary discipline if we are ever to make our industrial base stronger—[Interruption.] I am glad to see some assent to that view among Opposition Members.

I welcome the way in which income tax has been cut; that will help the less well-off. More attention should be paid to them, not just because we are running up to an election but because they are the people who deserve special encouragement. They are the key to the future effectiveness of the British economy.

Interestingly, the Budget has been unequivocally welcomed by Sir John Banham of the CBI, who has been critical of other aspects of Government policy in the past. He sees this Budget as contributing to the competitiveness of British industry.

Mr. Campbell-Savours

That is remarkable. I understand that a spokesman of the CBI in my part of the country, Cumbria, said on Radio Cumbria tonight that the Budget will do nothing for our area. Could it be that those on the ground have a different experience from that of those who sit in ivory towers?

Mr. Wolfson

It is up to the CBI to decide whether its director general lives in an ivory tower. He may live in a tall tower, but it is not made of ivory. He is usually well in touch with the views of his members.

I welcome the Budget, too, because it will encourage those working in the middle and skilled ranks of industry on whose performance at work, contributing constructively to the wealth of their companies, the economic health of the country depends. If that is effective and efficient, we have the wealth to pay for the social and education services that we wish to continue to increase and to improve.

I welcome the approach to income tax because it is fundamental to Conservative philosophy. In contrast to all the Opposition parties, we believe that it is right that individuals and families should keep as much as they can of their own money to spend as they choose. As hon. Members have emphasised in the debate today, it is not an either/or choice. A low personal tax regime over at least eight out of the 12 years that the Conservatives have been in power has resulted in a growing economy, because it works with the grain of what people feel—that proper and natural desire to keep more of what they earn for themselves, which makes their efforts at work worth while to them and their families. A regime that does not pay attention to that is not working with the grain of the people and will not be successful.

Mr. Lofthouse

Does the hon. Gentleman appreciate that some of the lower-paid families who he claims may benefit slightly from the tax concessions may find themselves worse off because they receive means-tested benefits that are decreased by more than the amount that they gain from the tax changes?

Mr. Wolfson

I am afraid that I cannot agree with the hon. Gentleman on that point.

Let me move on to the benefits that will accrue to pensioners, and the 5 million poorer pensioners who will gain from higher benefits. The fact that, for those on income support, a single person will receive an extra £2 and a married couple an extra £3 a week is a clear sign of the Government's concern for the less-well-off.

Miss Widdecombe

Hear, hear.

Mr. Wolfson

I am delighted that my hon. Friend is on the Front Bench to agree with my point.

The changes to car tax will be of particular benefit to the hard-pressed car retailers in my constituency, but I would not have been pleased to see my right hon. Friend the Chancellor move away from the policy which the Government have been following for several years of bearing down on the benefit of a company car. I am delighted that he has not let up on the regular and steady movement towards making that a less clear benefit to individuals and has brought it more into line with other tax regimes. Nevertheless, he has found a perfectly straightforward and sensible way to give some stimulus to the car industry, which is a key factor in the health of the economy.

In my experience, small businesses have suffered worst from the recession. Therefore, I strongly welcome the package of various measures for them announced today.

Mr. Campbell-Savours

Will the hon. Gentleman give way?

Mr. Wolfson

No, I should like to continue.

A number of hon. Members have expressed concern about the size of the PSBR. I have always been something of a Keynesian. I was less happy than some on the Conservative Benches when we followed a strict policy on borrowing during earlier recessions. In the present situation it is perfectly proper for Government borrowing to rise to deal with the budgetary problems caused by recession. Structurally, there is no budget deficit. The Government have taken a sensible way forward and, as a result of the good measures that are now in place and the competitive position of British industry, we shall be able to capitalise on that and return to growth at the end of the recession. Over the medium term we shall return to a balanced budget. During their term of office the Government have been able to repay a large part of the national debt. The borrowing requirement now is different from that which existed in 1979 when the Labour Government left office. The economy is set for recovery.

Mr. Campbell-Savours

When the hon. Gentleman replied to a question from my hon. Friend the Member for Pontefract and Castleford (Mr. Lofthouse) about the interaction between benefits and tax reductions, the Under-Secretary of State for Social Security, the hon. Member for Maidstone (Miss Widdecombe), shook her head vigorously. Perhaps the hon. Gentleman can persuade the Minister to explain why she shook her head.

Mr. Wolfson

I understand the hon. Gentleman's point, but I shall continue with my speech. My hon. Friend the Minister or her colleagues will have opportunities to speak.

As I said, the economy is clearly set for recovery. Inflation and interest rates are down. Companies and individuals have reduced their debt burden, and productivity and competitiveness have increased. There can be no argument on those matters. Our unit wage costs, which are the key to the future and to our competitiveness, are rising more slowly than those of our competitors. That means that real earnings are able to rise, and are doing so on a firm base. It would be the height of irresponsibility for a Labour Government to pursue policies that would lead to further inflation and result in a loss of competitiveness in British industry. That route would lead to the loss of many more jobs, because other countries would produce the goods and services that are bought by us and the rest of the world, resulting in a loss of jobs in Britain. That is the key reason for keeping inflation down. Without low inflation, we cannot look forward to success.

The House should consider an issue that was not dealt with in the Budget, and I put up a marker to my right hon. Friend the Chancellor and his Conservative successors—we shall return to the issue of British shipping and the difficulties that our merchant fleet has faced over the past 10 years. It is the Government's policy to avoid special subsidies to parts of British industry. One request by the General Council of British Shipping is that it should be allowed capital allowances. I appreciate the Government's concern that if they were to make an exception of one industry and allowed capital allowances, that would open the floodgates to similar requests from many other industries that are in difficulty. I argue, however, that our shipping industry is a special case and different from other industries, and I believe that there is concern about it in all parties.

The industry has a defence requirement that we cannot lightly set aside, and the need for action is critical. A merchant fleet that is strong and active in both ships and crew is essential for the economic and defence policies of the United Kingdom, and since last year the need for action to secure that has become more critical than ever. More well-known British companies are moving their ships or crewing arrangements offshore or they have gone out of shipping altogether. The United Kingdom-owned and registered fleet continues to contract and to age dramatically.

The capacity of our ships has decreased by a further 7.5 per cent. and on average they are over 15 years old. The average age of our seafarers is also increasing alarmingly. The average age of officers is now more than 40. For a seafaring nation such as Britain, that is unacceptable.

The Government are active in trying to solve the problem. Their strategy is to bring other countries, especially in the EEC, into line with us in not giving subsidies to shipping. I would argue that that is an unrealistic move because other countries tend to provide additional assistance to their shipping industries. I hope that my right hon. Friend the Chancellor will refer to the matter in a future Budget and give it more favourable consideration than it has been given in the past.

Debate adjourned.—[Mr. Wood.]

Debate to be resumed tomorrow.

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