§ 12.14 p.m.
§ Lord JACQUES
My Lords, I beg to move that this Bill be now read a second time. The Bill has two principal objects: first, to extend the financial provision for food subsidies, and, secondly, to provide for continuation of price regulation. In 1970 the Retail Price Index and the Food Price Index were level, but from mid-1970 until the beginning of 1974 the Food Price Index increased at a much greater rate than 1316 the Retail Price Index. One of the principal causes was the rise in world food prices, particularly in 1973, and also the depreciation of sterling.
Those with smaller incomes spend the greater proportion of their incomes upon food, and, no matter what the causes were for the increase in the food prices at a greater rate than prices generally, it meant that the gap in the standard of living between those with low incomes and those with high incomes greatly widened. When the present Government took Office they found that the previous Administration had already subsidised milk and butter. We, in our term of Office, have increased the subsidies on milk and butter and, in addition, we have introduced subsidies for bread, cheese, household flour and tea. The cost in the present financial year is £510 million. The effect has been that the Food Price Index has been reduced by six points as a result of the subsidies. But I may add that, because of the influence which the Prices Department has had on other prices—particularly in connection with the voluntary agreement —the effect is somewhat greater. The effect on the Retail Price Index is equal to one and a half points.
To relate the question of benefit to families, the average family of two adults and two children get a benefit of 75p per week. A pensioner couple get a benefit of 50p per week. As a consequence of the action of the Government in introducing these additional subsidies, the trend that was apparent between 1970 and early 1974 has been reversed. In 1974 the Food Price Index did not increase at a greater rate than the Retail Price Index, but, rather, at a lower rate. It is in that sense that the trend has been reversed. But I must add that in February of this year there was an indication that the Food Price Index was again rising at a somewhat greater rate, and that will have to be watched. What certainly has happened is that the gap in the standard of living, between the lower paid and the higher paid, has been somewhat reduced, whereas in the previous period of 1970 to early 1974 it had widened.
I come now to the provisions of the Bill. Clause 1 makes changes in the powers to pay food subsidies. By far the greatest change in Clause 1 is to increase 1317 the limit of food subsidies from £700 million to £1,200 million. As I have already indicated, the cost in the present financial year is £510 million. It is estimated that the cost in 1975/76 will be £550 million. So that would make a total to date of £1,060 million. By increasing the limit to £1,200 million we have left an adequate working reserve. In the long term, we hope to begin running down the programme of food subsidies, but what is quite clear at the moment is that food subsidies will certainly be necessary in the years 1976/77. We therefore provide in subsection (3) that a further £500 million can be added to the total amount provided for subsidies by Order, but this Order cannot be made before 1st April 1976. For technical reasons, the subsidies on milk and butter were limited to one year, and the second object of Clause 1 is to provide for these subsidies for a further year. In addition, in sub-section (2) we provide that the milk and butter subsidies can be continued for a further year, making a second year, if that is necessary, and that can be done by Order. The third object of Clause 1 is of relatively minor importance in the context of the United Kingdom but is rather important to those of our fellow citizens who live on the Isle of Skye, the Isle of Harris and the Isle of Lewis. It so happens that the producers in those areas do not benefit from the guarantee arrangements and, in order to give power to the Secretary of State to give the milk subsidy on the islands concerned, it has been necessary to make slight alterations in the wording of the original 1974 Act, and this Bill does that.
Clause 2 seeks to make four changes in reference to price regulation and the display of prices. One of the principal objections of the retail trade to price regulation has been the number of notices that they have had to display. As a result of discussions with the trade, considerable changes have been made to meet the wishes of the trade, but there was one thing we could not do without having the power to do it, and that was to authorise some of the notices not to be displayed but to be available on production. The first of the objects of Clause 2 is to enable the Secretary of State to make Orders not just that prices shall be displayed but that they shall be 1318 available for information on request. This will considerably ease the burden and it will mean that only the most important notices will be displayed. The others can be in the form of a typed list which can be produced at the request of the customer.
The second object of Clause 2 is in connection with enforcement. One of the difficulties of enforcing regulations which are concerned with the control of gross margins is that it is necessary to have available information which can be checked by the enforcement authorities. It is our intention to simplify the information which is needed for this purpose, and we also seek by Clause 2(1)(b) to require retailers to have that simplified information available for the enforcement officer, and this goes some way to meet the points raised by the enforcement authorities. The third object, which is provided for in subsections (2) and (3), is to give the Secretary of State power to allow a particular trader in very unusual circumstances to charge more than the maximum price. It is felt that this power should be available where the Secretary of State is satisfied that it would be just to allow that concession, and these subsections will give the Secretary of State that power.
The final object of Clause 2 is dealt with in subsection (1)(c). The price regulation powers cease at the end of this month but they can be extended by Order for a further year. These powers are absolutely necessary to ensure that the subsidies do, in fact, reach the consumer. No time limit has been put on the food subsidies and it is felt that there should be no time limit on the corresponding price regulation, which is necessary for the purpose of ensuring that the subsidies reach the consumer. The price regulation powers have not been used in relation to non-subsidised foods. Instead, we have the voluntary agreement and as long as we have that agreement the powers in regard to non-subsidised foods will be reserve powers, but we feel that they are necessary as reserve powers.
I suggest that the division between the Parties on his issue—that is, the issue of food subsidies—is not so absolute as it is sometimes said to be. The evidence for that is that when we took Office we found that milk and butter were already 1319 being subsidised. Further evidence is that the Conservative Party in their Manifesto at the October Election said that for the time being at least the food subsidies would have to be continued. We on our side do not see the food subsidies as a permanent feature of our economy. We see them as an expenditure which, in due course, will have to be phased out— phased out, perhaps, when the economic circumstances are a little different from what they are today and when alternative methods of protecting the lowly paid are available. I therefore suggest that there is not all that difference between the Parties on this issue and it is in that spirit that I move the Second Reading.
§ Moved, That the Bill be now read 2a.— (Lord Jacques.)
§ 12.28 p.m.
§ Viscount SIMON
My Lords, the views of the Liberal Party on food subsidies are quite well known and were made clear in your Lordships' House when the Prices Act 1974 was going through. We believe that these large indiscriminate subsidies involve a massive misdirection of resources because a very small proportion of them go to help those who are really in need. That was the view I expressed last June, and I am bound to say that I have not heard anything said, either by the Minister today or by the Secretary of State in another place, which has made me change my mind, not because I hold this view dogmatically but because no answer has really been given to the fundamental argument.
Indeed, as the noble Lord, Lord Jacques, said, the Government themselves recognise that this is not really the best way to deal with the problem. He repeated, almost in the same words, the words which the Secretary of State used in another place on Second Reading when she said:It still remains our intention eventually to run down the programme"—and then she hade this quite sensible remark:but the timing of any running down of the food subsidy programme must be related closely to the introduction of appropriate social benefits".—[Official Report, Commons, 30/1/75, col. 636.]That is very much what the noble Lord, Lord Jacques, said today.
1320 One must ask whether there was not an opportunity when the Social Security Act was going through this House for some of these benefits to be conferred on the less well-to-do with the possibility of thus reducing the bill for food subsidies. I seem to remember that a number of suggestions were made of extending benefits to various classes of people who are certainly among those less privileged, and they were turned down by the Government on the ground, which we cannot argue here, that there was not enough money. But if we are going to spend £500 million. £600 million or £700 million on food subsidies, it should surely be possible to meet some of these suggestions and to make a corresponding reduction in the food subsidies. Of course we recognise, my Lords, that subsidies are a help to those at the lower end of the incomes scale. The argument is not that they are not a help, but that they arc just the same help to other people, who can perfectly well afford to pay the market price for their food, and as a result much more of the taxpayers' money is spent with much less effect in the place where we want it to have effect.
I was interested in the figures which the noble Lord, Lord Jacques, mentioned, and I should like to ask him whether, in winding up, he could explain a little further. He said that it was estimated that a family of two, with two children, were benefiting to the extent of 75p and a family of two without children to the extent of 50p. He mentioned that that latter family were pensioners, but I take it that this applies equally to any other family of two without children. I assume that the figure is arrived at—the noble Lord may like to intervene—by taking the total consumption and dividing it by the number of people in the country, and perhaps assuming that children eat half as much as grown-ups, which would account for the fact that the family with two children gets 75p the other people get 50p.
§ Lord JACQUES
My Lords, I thank the noble Viscount for giving way. Research has been done not only in relation to the size of family and their usage of the subsidised foods, but also in regard to the different kinds of families. While it is true that in the case of a pensioner couple there would be a saving of 50p a week because of their usage of subsidised 1321 foods, it is not necessarily true of a couple who are much better off. I can give an example. A pensioner couple would be more likely to eat the cheaper foods which are subsidised, whereas a couple who were much better off might eat those foods which are not subsidised. The higher-priced foods are not subsidised. That applies not merely to, say, blue cheese, but also to bread, tea and other things, so that the 50p is specifically in the case of a pensioner couple.
§ Viscount SIMON
My Lords, I am much obliged to the noble Lord. The couple who are less well-to-do who are rash enough, perhaps, to eat bread rather than cake, and so on, in fact eat more and therefore their saving is more than 50p a week. At any rate, I think the noble Lord has explained how it was worked out. It must be a very complicated calculation, if you consider the eating habits of all the different people.
I still come back to the point that the majority of people in this country, I am happy to say—we are all happy to say— are not in the category of the very badly off, and therefore they will be taking far more of these subsidies into their mouths than those whom we really want to benefit.
I was interested in what the noble Lord said about the Government's long-term end because, as already explained, they have said that they want to get rid of the subsidies when they can introduce other suitable measures to help. I accept—I do not think any of us would fail to accept—that as the situation is now one must go on. The great difficulty about food subsidies is that once you have them they are very difficult to get rid of, and the longer you have them I am sure the more difficult it is to get rid of them. I certainly agree that they must be extended through next year, and to that extent the Bill is a necessary one. I know that my friends in another place voted against the Second Reading, but that is possibly what is called a tactical vote. They were wanting to nail their colours firmly to the mast—that they are opposed to food subsidies.
My Lords, so far as the minor effects of this Bill are concerned, of course we welcome the extension of the milk subsidy to the Scottish Islands, which some- 1322 how got left out. We welcome the changes in the provision for notices in shops. I think that during the discussion on last year's Act, attention was called to the burdens that the notices provision might lay on small shops, and I am very glad that those are being eased.
I think I must also welcome—because I believe in a measure of flexibility—the flexibility that is being offered to the Secretary of State apparently to waive the maximum price orders in regard to particular suppliers. I do not know whether the noble Lord in winding up can tell us the kind of circumstances in which this power would be exercised. It seems to me to put an extraordinarily difficult responsibility on the Secretary of State, to discover that a particular supplier, a particular shop, should be entitled to sell at above the maximum price, and it would be interesting to know the circumstances in which the Minister feels this might happen. Finally, my Lords, I also welcome the extension of the price regulation powers. That is obviously absolutely necessary. I regard the price regulation powers in the original Prices Act as much more important, and certainly much more beneficial, than the subsidies.
Finally, my Lords, I just wonder how far the Government's policy has been influenced by its effect—which, indeed, the noble Lord mentioned—on the Retail Price Index and the Food Price Index. I think some light was thrown on that by a remark made in another place by the Financial Secretary to the Treasury on 21st March during the debate on the general resolution about inflation. The Financial Secretary had been asked about cutting food subsidies, and his reply was:I will tell him what happens when food subsidies are cut. They may be cut, of course, but the offset is an immediate increase in the cost of living. That, as we have discussed in another context, leads immediately, quite properly, to wage claims from trade unions, which are responsible for maintaining the standard of living for their members and their families." —[Official Report, 21/3/75, col. 2121.]In the present state of the country, of course we want to do everything possible to prevent excessive wage claims, and I think this is a perfectly respectable argument; but, if that is the argument for imposing food subsidies, the Government should come clean about it. I think it is 1323 also worth pointing out that it is not, in fact, reducing the cost of living: it is reducing only the cost of living index and concealing the fact that the cost of living has gone up. I am not sure that, in the long run, that would be a very satisfactory thing to do. I hope that, when he replies, the noble Lord can tell us a little more about the Government's long-term views, and about when they feel it would be possible to introduce measures which will enable these food subsidies to be reduced. This would be of great interest to your Lordships. We on these Benches believe that a credit income tax system, above everything else, would enable really badly-off people to be assured of enough money to live on. If this were introduced successfully, it would make the continuation of food subsidies —with this waste of money in subsidising the food of rich people—unnecessary.
§ 12.40 p.m.
My Lords, in political circles old age pensioners are always supposed to be paupers. I feel very poor at times, but I am not a pauper. Out of the 8 million or so old age pensioners, there are millions who have other pensions and savings, and other means. The pauper image is a completely false one, advanced for political purposes from public platforms. The alternative to food subsidies is some sort of direct help to those who are worst off. From the public expenditure point of view the great advantage of the latter methods is that they are taxable. The increase in the old age pension brings in a great deal of income tax; and so does the children's allowance from those people who are above the poverty line. For that reason, that is the cheapest way of providing help to the worst off.
Government calculations never seem to show the tax credit on the opposite side to the pay-out debit. I do not know whether the Treasury ever do such calculations, but they never seem to appear in public, with the result that the nation's balance in the matter is completely obscured. I believe that the cost of living —and mind you, my Lords, it is not only food; it is services and everything else —figures in every place where people are gathered together. To some extent, it is a fact that the males have, over the years, succeeded very thoroughly in swindling the females of the nation. On 1324 the whole, men are a little quicker at arithmetic than women, and I have little doubt that there are millions of house-wives in this country who have never received the increase in their housekeeping money that they should have done because their husbands have been able to pull the wool over their eyes. That I have known ever since the war.
What we should set on foot is a campaign for Women's Lib to demand women's proper share of the enormous wages which are being paid out today. One reads in the records about official wage figures. We are told that the basic wages of "so-and-so" have gone up to, say, £32.60, or some such figure, and we probably find that that man is bringing home £75. He is living in a council cottage, has no expenses of education, and is having to keep merely his car and his family. The net result of all that is that the housewife does not get enough money for the food, and so she grumbles like anything. The torrents of beer now being consumed in this country have never been exceeded in history; to say nothing of tobacco, or of the fact that although petrol is now extremely expensive, consumption has hardly declined at all—or so I understand from the news this morning. That I suggest would be one of the best moves to combat the general grumbling about the cost of living and the wage demands.
I am perfectly sure that the noble Viscount, Lord Simon, is quite right about the Retail Price Index. The Treasury has had that gambit in view ever since, and during, the war. I well remember certain articles that I will not mention, and certain politicians whose names I will not mention either, which used heavily to subsidise certain things that were more or less unavailable in order to keep the price index down. That happened in the latter days of the war, and shortly afterwards. Unfortunately I am afraid that we cannot get rid of subsidies at the moment; we cannot do that "at a stroke". But I hope that in due course they will be replaced by benefits in income tax, or otherwise, to the worst off—
§ Baroness GAITSKELL
My Lords, may I comment on the noble Lord's statement that it is a fact that women are 1325 dunces at arithmetic and that that makes them accept wages from their husbands which they know are very often not the same amount of wages as are received at the source of employment. That is absolutely untrue. It is true that there are many women who do not receive the proper amount or the proper share of housekeeping money which they should fairly receive. But this is simply due to brutal male domination that has taken place over the years. I hope that the new Bill dealing with sex discrimination will bring this matter out in full force, and that women will now claim what they should claim for their housekeeping, which means wages for the work they do as well as money for the food they produce for their dominating husbands.
My Lords, I did not accuse women of being dunces at arithmetic. I can only suggest that their brutal husbands have so brutalised their minds that they are not so sharp at arithmetic.
§ 12.46 p.m.
§ Lord ELTON
My Lords, the principal effect of this Bill is to increase the power of the Government to spend money on subsidising tea, sugar, bread, milk and butter. The present ceiling is £700 million, and it is proposed to raise it to £1,200 million, up to 31st March 1976, and to £1,700 million from 1st April 1976. That is to say there is an increase in the total sum of nearly two and a half times. This is not a blank cheque, but it is a very big cheque indeed. I am glad that the noble Lord said that those who benefit from it will now include the residents in the Hebrides, and I think they have borne their deprivations long enough. I welcome this expansion—
§ Lord JACQUES
My Lords, they have not borne it at all, because we have been paying it out of a special account, and the payments were approved by the House of Commons. All we are doing now is confirming it.
§ Lord ELTON
My Lords, I am delighted to hear that this difficulty was circumvented, although one is always suspicious of Governmental circumventions. I must follow the noble Viscount, Lord Simon, on his point, in that we find 1326 the subsidisation of absolutely everybody —rich and poor alike—has something Gilbertian about it. According to figures produced by the honourable Member for Eastbourne, the Under-Secretary of State in another place, I see from Hansard for 19th November, 1974 that 52 per cent. of the subsidies will be received by households with an income of over £50 a week, and that is 52 per cent. of the population. Only 33 per cent. will go to households with incomes of under £40 a week, and that is 32 per cent. of the population of the country.
There is a close parallel between the percentages and obviously, whatever the figures that are advanced, there is an indiscriminate spreading of money which we regard as both expensive and ineffective. This is in spite of the elaborate and sophistical calculations of the Secretary of State in another place who was at pains to get us to disbelieve the evidence which is so plainly before us.
My Lords, the noble Lord, Lord Hawke, has made observations which it is impossible not to allude to, if only to say that the revelations about his system of housekeeping allowances will lead to the suppression of the circulation of Hansard in the near future in a number of houses that I can think of. I am sure that he speaks only for himself in regard to the quickness of wit between men and women in arithmetic. Perhaps I am unusual in this, but I ususally find that ladies get there quicker.
My Lords, it is alleged by noble Lords opposite that the money for these subsidies is taken from direct taxation, and that therefore the apparent unfairness of subsidising a loaf of bread—making toast for the breakfast table of a millionaire—is available to all. But the Chancellor of the Exchequer, on a number of occasions, has led us to believe otherwise, notably in a television broadcast on the 26th September, when he clearly implied the contrary, saying on that occasion:I had to increase, in my opinion, excise duties in order to find the money to subsidise basic foodstuffs.If noble Lords opposite think that poor people do not have recourse to excisable commodities to help them face the cold blast of economic reality, then they deceive themselves.
1327 The extra £1,000 million is an additional strain, in our view, also upon the Government borrowing requirement, which seems to leap up and down with every quarterly Budget we receive. It is a wasteful and inefficient way of helping those who need help, and its wastefulness and inefficiency restrict the level of help that can be given to those who genuinely need it. There is the added and, in inflationary terms, horrifying, danger that subsidies will be used to pay for wage increases in the food industries themselves. If the bakers get a rise and recoup themselves out of price increases instantly off-set by subsidies, we shall be moving from a spiral to a whirligig.
At this point one wonders whether a new philosophy of government has been evolved. Then one recognises all too clearly the principles of Juvenal, because the principle was enunciated in the Roman Empire that the only things that interest the people are panum et circences—bread and circuses. We have here the provision of ample bread, subsidised by the State, exactly as Juvenal recommended, and in the present gyrations of the Cabinet over our entry into Europe, we have the entertainment as well. My only other allusion to this system of subsidised wages out of price increases offset by subsidy is that I notice that we subsidise tea and I am sorry that the noble Lord, Lord Bruce of Donington, is not here to applaud the improved position for those working in Sri Lanca.
My Lords, we think this is a bad system and the longer it goes on the harder it will be to get out of. The cost is bound to escalate with inflation and, unless the system is terminated gradually over a period of a year or so in the immediate future, the step-up in prices at the end of the system will be sudden and deeply resented by the consumers. The Secretary of State in another place said, and the noble Lord opposite confirmed, the Government's intention to terminate this in the indefinite future. My view is that the future in this case should not be indefinite, but definite.
My Lords, I turn now briefly to Clause 2 where we are in greater accord. We come to the main administrative provisions of the Bill. These have been, to some extent, mitigated in another place, 1328 and for that mitigation we are grateful. The provisions include for regulations requiring retailers to keep records of as yet unspecified detail and as yet unspecified complexity to enable the Secretary of State to ascertain whether the orders she gives are being adhered to. Noble Lords will remember that, when the principal Act was passed, I spoke on behalf of the small shopkeeper. The noble Lord, Lord Jacques, generously acceded —and I hope he will be able to take on board, at this point, my acknowledgment of this—to our representations; and small shopkeepers were excluded from some regulations. In another place, on this occasion my honourable friends sought to have this exclusion placed in this Bill, but inadvertently they drew it too wide and the Amendment they sought to carry would have excluded such shopkeepers from the need to observe the National Maximum Prices as well as from the tedious and difficult precisions designed to facilitate the control of chain stores and supermarkets. This we have no intention of doing.
However, I feel sure that the noble Lord, whose experience in this field and whose sympathetic understanding of the needs of the small man we welcome, will not be put out to know that I have drafted an Amendment to Clause 2 which will have the effect of enacting the concessions which he made by other means in the 1974 Bill. We do not like the subsidy system, but we will not seek to reverse the money provisions of this Bill. We like the village shops for a number of reasons which I shall not now adduce, and we shall seek to protect them from being caught up in the machinery designed to control stores into which their own shops—and the bedrooms over, and the parlour at the back—could fit many times over. I conclude by wishing my noble friends on all sides of the House a Happy Easter, and I recommend that they buy their Easter Eggs in the small shop whose door goes "Ping!" when they go in.
§ 12.55 p.m.
§ Lord JACQUES
My Lords, may I thank both Opposition Parties for their not unkind reception of this Bill. I shall reply briefly to the points raised. First, there was some question about the extent to which the subsidised foods were used 1329 by families of different sizes and different incomes. We have full information on this because of the National Food Survey. We can go so far as to tell you that since the subsidies were introduced the pensioners are using more of the subsidised foods; that is to say, their proportion in relation to other families is not greater but they have increased their consumption of subsidised foods since subsidies were introduced.
I now come to the general question raised every time we talk about subsidies. Why subsidise everybody for the purpose of helping a few? The noble Viscount. Lord Simon, said that we should have taken the opportunity in the Social Security Act of giving specific relief and gradually dropping subsidies. I would point out that there must be two conditions and not one. He assumed only one: that the right kind of facility must be there. I would add to that: when economic circumstances were suitable—and 1 do not think the economic circumstances are yet suitable—to drop the subsidies.
My Lords, we have forgotten some of the reasons why the subsidy programme was introduced. Your Lordships will remember that, when we took Office, there were threshold payments and we were determined to reduce the need for increases in wages. Consequently, there was at least one occasion when, as a result of subsidies, threshold payments were not made. I would point out that when there are any wage negotiations the most important element raised by the trade unions is the rise in the cost of living. It is clear that, if we can keep down the cost of living, we shall have some influence on the level of wages. That is also one of the reasons for introducing subsidies. As far as the better off are concerned, they pay not merely for their own subsidies but also for the subsidies of the less well-off. Finally, as far as this point is concerned, we have a means of helping the less well-off without a means test and we also have the absolute guarantee that there is a 100 per cent. take up and no question of there being a good many people who could benefit having pride and not benefiting. While the subsidy system may have some disadvantages I am afraid that in the comments made by the Opposition they have over-looked the advantages.
1330 My Lords, I was asked a question on the higher prices that might be allowed by the Secretary of State in specific cases. This has arisen primarily in connection with bread. Some of the small bakers have very high costs and in order to allow them to charge a higher price, where they were also retailers, some amendment to the Bread Order was necessary; but it was a cumbersome procedure. The effect of the Amendment which the Bill will make will be to avoid this cumbersome procedure. It could be done, but only in that cumbersome way. So far as phasing out is concerned, I would refer your Lordships to the White Paper on public expenditure (Cmnd. 5879). Your Lord-ships will find there that we gave an estimated figure for subsidies from 1974– 75 to 1978–79, not merely in money but in real terms in terms of 1974 prices, so that there is some guide to the Government's intention.
§ Lord ELTON
My Lords, if I may interrupt the noble Lord for a moment, may I ask whether the dates that he has just given imply an actual commitment to the expenditure of this money until 1979, and, therefore, a further call on Government funds and another amending Act, or is this a hypothetical exercise?
§ Lord JACQUES
My Lords, the estimates in regard to the subsidies are in exactly the same position as the estimates in regard to any other public expenditure. They are not a commitment; they are merely a tendency to look ahead at a given point of time. But long before the final year there will be changes, and it is my opinion that by the time we get to 1978/79 we shall not be spending that amount of money on subsidies. It is an estimate as at the present time.
§ Lord JACQUES
My Lords, I think that we shall be spending less. I want now to deal with the question of inflation which was raised. I shall make only two comments. First, I repeat what I said a little earlier, that the cost of living is perhaps the most important element in wage negotiations. If by subsidies or any other means we can keep down the cost of living we shall be tending to keep down the level of wages. In that sense, food subsidies are not inflationary but are anti inflationary.
1331 To deal with the question of food subsidies resulting in Budget deficit, whether Budget deficit is inflationary depends on how it is financed. For example, if a Budget deficit is financed by borrowing money which would have been available to other people, then by borrowing that money one is taking some demand out of the economy. That compensates for the demand which is being put into the economy through the Budget deficit. I believe that that is generally accepted. However, if the Budget deficit is financed entirely in the form of new money, that means that one is putting demand into the economy without taking any demand out. I am pleased to say that, if one takes the wider definition of M3—not to be confused with the motorway—one finds that the increase in the supply of new money in 1974 was at less than half the rate of 1973. The Opposition should not tease us about inflation: they should be grateful that what we inherited is being handled so well.
On Question, Bill read 2a, and committed to a Committee of the Whole House.