HC Deb 16 December 1993 vol 234 cc1255-8
4. Mrs. Gillan

To ask the Chancellor of the Exchequer what representations he has received in response to his Budget.

Mr. Kenneth Clarke

The Budget has been widely welcomed throughout the country.

Mrs. Gillan

At this festive time, will my right hon. and learned Friend agree with the owners of small and medium-sized businesses who have made representations to me that his Budget is a major step forward in creating the stable economic environment in which they can trade? Further, does he agree with them that the specific measures taken to help small businesses in the Budget, together with the low interest rates and unprecedented low rates of inflation, make it possible for them to look forward to a very happy and prosperous new year?

Mr. Clarke

I believe so, and I am glad that my hon. Friend has had the same reaction from the small business people she has met as I have had from the people I have met, who have been generous in their comments on my Budget. Mr. Stan Mendham, who is by no means always uncritical of the Government, has been very praising of the Budget. A commentator described me as having something of a bee in my bonnet about small business. That is the case. I believe that in order to improve the prospects for investment in small businesses, it is legitimate to deregulate and take the burdens off them and encourage more risk capital and self employment in this country. I believe that it is in the small and medium-sized business that we will get the growth of employment that we require throughout the 1990s. I am gald that my hon. Friend approves of the fact that we laid such heavy emphasis on the needs of small business in the Budget.

Mr. Sheldon

Facing the consequences of the severe recession, is it not clear that the balance of payments deficit is more important than the Budget deficit? With the pound increasing in value steadily during the past six or nine months to a considerable extent, is it not also clear that this is the time to reduce interest rates, cut imports and encourage exports?

Mr. Clarke

I am glad that the right hon. Gentleman, who is very experienced in these matters, acknowledges that we are now firmly on top of the deficit in the public finances, and so is turning his attention to the balance of trade. He will know that, at the moment, it is difficult to get accurate figures on our trading position as we introduce the new system because of the introduction of the single market. Because our economy is so much stronger and demand is rising here compared to the continuing recession in Germany and France, there is a tendency for people to wish to sell into our economy, which is affecting our position. Otherwise, our trade figures are extremely good and our currency has been remarkably stable for the past few month—it has not been strengthening noticeably. Most importantly, British industry is retaining its competitiveness. We are still holding the advantage from devaluation. Our unit wage costs have fallen this year, and we are in a competitive position. I shall keep an eye on all the matters on which I usually keep an eye when deciding monetary policy, but I am reasonably optimistic about the British trading position as we come out of the recession.

Mr. Heald

I welcome the measures in the Budget which deal with small businesses. Does my right hon. and learned Friend agree that the measure suggested by the right hon. Member for Yeovil (Mr. Ashdown)—slapping an extra 1 per cent. on national insurance contributions for the self-employed—would be a disaster for small businesses and would affect the competitiveness of British industry?

Mr. Clarke

I entirely agree with my hon. Friend.

Mr. Skinner

What about what the Government are doing later today?

Mr. Clarke

My hon. Friend was speaking about an increase in the national insurance contribution for the self-employed. The hon. Gentleman is wrong. We are raising it for employees this evening.

If implemented, the proposal made by the right hon. Member for Yeovil would, as my hon. Friend said, damage the interests of self-employed people. Self-employment grew rapidly in the 1980s and, in a modern economy, it is desirable that we reduce the burden on people going for self-employment, rather than increasing it in the way proposed by the Liberal Democrats.

Mr. Beith

The Chancellor presumably recognises that the rate of contribution by the self-employed is below that paid by employed people and employers. As the Budget strategy depends very much on low interest rates and low inflation, will the Chancellor look carefully and favourably at the proposal made by the Treasury Select Committee today, which carries the support of all but one member of the Committee, for a central bank that has autonomous responsibility for monetary policy? Is not that the way to lock in low interest rates and low inflation? Will he give that suggestion the most careful consideration?

Mr. Clarke

I can agree to give the proposal careful consideration, but it requires much further debate and discussion. I am grateful to the Select Committee for its report. We shall have an opportunity, through the Bill being presented today by my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen), to debate those matters in the House. I have an open mind on the subject, although people try to guess my opinion. I have a feeling that the Select Committee's proposal is becoming rather a fashionable cause. We should consider it with care, also taking into account such matters as parliamentary accountability for an increasingly more autonomous Bank of England.

Mr. Bill Walker

Has my right hon. and learned Friend received representations from the Scotch whisky industry, which has been telling me that the sensible treatment of excise duties in the Budget will have a substantial impact on its sales at home? Is he aware that that will increase the revenue to the Treasury and help the position abroad, because it sends the right messages for an industry that exports almost £2,000 million worth of products?

Mr. Clarke

I agree with my hon. Friend and I am glad that I was able to follow the precedent set by my right hon. Friend the Member for Kingston-upon-Thames (Mr. Lamont) in acknowledging the problems of the Scotch whisky industry and not increasing excise on its products. I hope that the industry will be able to take advantage of that and will recover its strength. I also hope that the industry derives the enormous benefits that could potentially accrue to it from the successful conclusion of the GATT round, which is the best piece of economic news that this and most other trading countries have received in 1993.

Mr. Gordon Brown

After the Chancellor's admission yesterday that the typical family will pay the equivalent of 7p in the pound more in income tax, will he also confirm that the typical family will, from April, be paying £10 a week more in seven separate tax rises and three new taxes? Will he also confirm that, while the wealthiest 1 per cent. received 33 per cent. of the income tax cuts made in the 1988 Budget, middle and lower-income Britain is now paying 95 per cent. of the tax rises from this year's Budget? Are not the Tories now exposed not only as the party of higher taxation, but, as it always has been, as the party of unfair taxation?

Mr. Clarke

The hon. Gentleman uses what he describes as a "typical family". It is not an average family, but a family that he takes out of the middle ranks of those earning. I have acknowledged that we are increasing taxation. I made an hour and a quarter's speech describing my taxation increases. The hon. Gentleman's mistake is to say that that is the only effect that the Budget will have on the average family. If the hon. Gentleman had his way, he would follow policies that would increase inflation, again increase interest rates—now at their lowest level for 16 years—increase public sector borrowing, slow the recession recovery, reverse the fall in unemployment and probably cause it to increase again, and once more make this country extremely uncompetitive in world markets. That would do far more damage to the ordinary person than my Budget, which sorts out the problem with public finances so that we are clear to have a stronger recovery in the 1990s.