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 amendment with respect to value added tax so as to provide—
§ 5.52 p.m.
§ Mr. Edward Heath (Sidcup)
It is my pleasant task on behalf of the whole House to offer sincere congratulations to the Chancellor of the Exchequer on the manner of the presentation of his Budget. Such protestations are customary at the beginning of the speech of the Leader of the Opposition, but I assure the Chancellor that for a considerable number of reasons the congratulations of the House on this occasion are particularly sincere.
First, we should like to congratulate him on the way he has overcome what must be a considerable physical ordeal. The Chancellor sat down two hours and 20 minutes, I think, after rising to present his Budget statement. Such duration makes a considerable demand on any Minister of the Crown in presenting a statement to the House.
I suggest that the Chancellor need not show undue modesty, as he tended to do at the beginning of his speech. Surely what he delivered must be one of the most complicated and wide-ranging Budget statements of modern times, as well as one of extraordinary length, and we congratulate him on the clarity and lucidity with which he has woven his way through the labyrinthine maze of his Budget statement.
330 During the course of his exposition his own benches began to empty, but he should not take umbrage from that. It was not, I feel, due to the manner of the presentation of his statement. Whether it was something to do with the content of his statement is not for me to say. We admire him for the way he presented his Budget.
It seemed to some of us that some of the remarks in the opening part of the Chancellor's speech were somewhat contentious for a Budget statement. However, I do not wish to dwell on that today. There will be other opportunities to deal with the arguments which he put forward about the miners and the cost of buying industrial peace.
We ought to congratulate the Chancellor on being able to produce a Budget Statement at all. To me it seemed that the three weeks of the General Elzetion campaign was a long time, but he indicated that the three weeks taken to prepare his statement was a short time. I can well understand his feelings.
My right hon. Friend the Member for Altrincham and Sale (Mr. Barber)—the former Chancellor of the Exchequer—left some measures prepared which the right hon. Gentleman has accepted and has embodied in his Finance Bill, but neither he or his colleagues have had any previous experience at the Treasury, and so the achievement to which we have listened today is all the more remarkable. Therefore, I reiterate the warm congratulations of the House to the Chancellor.
So much for the manner of the presentation of the Budget. I now propose to say something about the matters with which the Chancelllor has been concerned. We shall want to examine these with great care, particularly as today's Budget was one of the most complicated and wide-ranging Budget Statements of modern times. It would be unfair to the Chancellor, to the Government and to the House to attempt immediate judgment on many of the matters with which he dealt. Careful study is needed in order to comprehend in detail what the Chancellor has outlined.
I sometimes wonder whether it is a happy custom that the Leader of the Opposition is expected to reply at length after hearing a long speech from the Chancellor, such as that today, of two 331 hours and 20 minutes duration. Perhaps I should return to an earlier custom and comment on certain major matters and leave my right hon. and hon. Friends who will be wishing to take part in the debate to deal in more detail with some of the other points.
At the beginning of his speech the Chancellor of the Exchequer set out what he said was a brief summary of the economy. However, I suggest to him that there were certain oversimplifications in his analysis which could be misleading. When he was dealing with the general level of inflation it was an omission not to analyse what was due to domestic inflation and what was due to imported inflation. We do ourselves and the country less than justice if we look at the total problem without breaking it up into these two categories.
In talking about the deficit on the balance of payments, he omitted, although saying that there was an overall problem of £2,000 million on oil, to break up the recent figures for the balance of payments into what was due to the increased amount paid for oil and what was due to the non-oil deficit.
The Chancellor also spoke about the need to use all our resources in the economy, and to waste none of them. I profoundly agree with this. We tried to achieve success on this point with the trade unions and the employers. If one takes that position one has to acknowledge—the Chancellor will come across this in the coming year—the problem of that part of the balance of payments deficit which is due to growth. The Chancellor said that the underlying growth rate of the country has not changed recently. I do not entirely accept that. I agree that it has not changed sufficiently, because the capacity has not been there. Until we are able to achieve capacity in our industrial system we shall never get the underlying growth rate pushed up. This is a problem which successive Governments have faced since 1945. The right hon. Gentleman's predecessor in office in the last Labour Government encountered it, and the right hon. Gentleman will encounter it and have to try to find a solution if we are to have an increase in the underlying growth rate.
332 The Chancellor has agreed to keep the competitive credit system introduced by his predecessor. In this he has overruled the Prime Minister, who strongly objected to it. We do not object to it in the least, and we are glad that the Chancellor will look at any difficulties which may emerge in the competitive credit system.
What is the Chancellor's real dilemma? It is that a considerable amount of deflationary pressure is already at work in the economic system. There is, first, the extra tax yield which will go to the Treasury because of the increase in incomes. There is the rise in oil prices of about £2,000 million a year, which is either a tax on the consumers or a demand on industry. My right hon. Friend the previous Chancellor of the Exchequer took out £1,200 million for the coming year, which was announced last December.
Prices and profits are being squeezed by price controls, or, in some cases, by demand which is now becoming stagnant at home. We have heard the protestations of the motor industry about this. So this is already a powerful element in the economy. The question is, how great an effect will it have and when will it be necessary to counteract this powerful deflationary element which is already in the economy? This is where the balance of judgment comes in.
If demand begins to fall and prices and profits are being squeezed, we shall undoubtedly see unemployment rising. There was a significant omission from the Chancellor's statement today. He gave us no guidance on what he expects to happen to the employment picture for the rest of the year. It may be that he or his colleagues can help us on that matter later in the debate. If the right hon. Gentleman is to avoid increased unemployment later in the year, reflation may be needed to deal with the situation, but if he reflates he is faced with the dilemma that inflation may continue to rise.
That is where the question of a soundly-based incomes policy becomes preeminent. The Chancellor's immediate predecessor in the last Labour Government—the right hon. Member for Birmingham, Stechford (Mr. Jenkins)—of whom the right hon. Gentleman has been critical, found that that was happening 333 and that he was unable to deal with the situation because he no longer had an incomes policy of any kind. Therefore, it is vital that in the dilemma which the Chancellor faces he should insist on an effective incomes policy. The only alternative is to find that the deflation in the system is. causing unemployment, and that will be counter to the right hon. Gentleman's first principle of using all our resources.
No one should under-estimate the difficulty of dealing with that sort of situation or of analysing it, or of prescribing solutions for it once an analysis has been made—least of all those of us on the Opposition side of the House who had to deal with those problems over a momentous period of nearly four years. We would never under-estimate the difficulty of the timing of action of that kind.
I think that the Chancellor was, in a way, trying to pre-empt what I am saying by announcing that he proposed to have a second Budget. Perhaps it is time every right hon. and hon. Member stopped pulling the leg of successive Chancellors if, at different times of the year, they propose to take action to alter the course of the economy. I hope that I am not being unduly charitable in making such a suggestion. We are all of us, on both sides of the House, accustomed to this procedure. Perhaps now, as the right hon. Gentleman announced deliberately that he will have a further Budget and that it will give him the opportunity of making further adjustments, we may accept the difficulty of keeping the economy working with a reasonable momentum and accept that, particularly in the uncertain state of the world today, Chancellors will have to adjust from time to time and that it is right that they should do so.
The Chancellor commented, somewhat to the disadvantage of the previous Government, on how long it takes for specific action to work through the economy. That will be just as true of what is going on now, with the £1,200 million reduction in public expenditure of my right Hon. Friend the Member for Altrincham and Sale, as of the effects the Chancellor is creating by the measures he announced in his Budget speech. The test of everything the Chancellor said is how much it is designed to deal with the nation's economic problems and how 334 much it is designed to deal with the Labour Party's problems and political obsessions. I want to look at the matter from that point of view.
During the past three weeks we have had many announcements of benefits which the present Government wish to bring to the people of this country, or at least—let me put it as fairly as I can —announcements of measures which they believe to be benefits. There have been the social service benefits, which are very expensive, as we all know—£1,240 million in a full year—and subsidies of various kinds. There are the food subsidies, now costing £500 million a year, and rents are being frozen at a cost of about £70 million.
On social services benefits the right hon. Gentleman used a rather interesting phrase. He said that having raised money from employers and employees, the insurance fund would be in sufficient funds to deal with those benefits. To my rather suspicious mind that means not only that the Government will pay 18 per cent. but that they will draw on what is now a surplus in the fund. Should not the Chancellor have told us so, if that is the case? Has he allowed for that in his demand management figures? It seems to me to be quite a considerable sum of about £220 million that he may be taking out of the insurance fund. That, in social services benefits, will be pure demand, as we know from experience. Has the right hon. Gentleman taken that into his calculations?
Now we come to the food subsidies, on which the Chancellor has said he proposes to spend £500 million, plus what was allowed for, which I think was £50 million. On my calculations, milk alone will cost £310 million, an enormous subsidy, compared to our arrangements for limited subsidies. Most people who have had to deal with food subsidies have always looked to a position in which they can gradually ease them out, because of the distortions which they obviously cause, but the Chancellor is deliberately increasing the subsidy substantially on one item of food—not just holding the price but deliberately putting it down—so getting further and deeper into the whole question of indiscriminate food subsidies. I ask myself whether it was a wise step in the circumstances. It also indicates that the subsidies which were 335 more or less promised on all the other foodstuffs will not be available, because if the Chancellor sticks to his figure the money will not be there.
I come now to the Budget judgment. The right hon. Gentleman says that it is broadly neutral, perhaps slightly deflationary. What was interesting to us was to see whose advice he had taken. His right hon. Friend the present Foreign and Commonwealth Secretary went, for the purposes of tuition, to the Oxford school. Most people in the House and the country agree that the consequences of that tuition were not particularly happy or profitable either for the right hon. Gentleman or for the country. We understand that the present Chancellor has gone to the Cambridge school. We understand that some of the advice—from Dr. Kaldor, for instance—was solidly deflationary. Some was deflationary three months ago and is inflationary now, with both points of view expressed in letters to The Times. The Chancellor has done the obvious thing and decided to go neutral over the whole affair.
We must look at the right hon. Gentleman's figures carefully when we have a chance. Some of us remember his period as Secretary of State for Defence. That taught us that we had to look at all his figures very carefully. The right hon. Gentleman may have thought it appropriate to treat the Treasury in that way when he was at the Defence Department. What is not appropriate is for him as Chancellor to treat us as he previously treated the Treasury. We shall look at all his figures.
What are the effects of the Budget and the Chancellor's Budget judgment on inflation? He said that a man earning up to £54 a week will not be paying more in income tax or social security contributions. But he then jumped to the man earning £200 a week. Of course, in our industrial society today a considerable number of skilled workers earn £54 a week upwards. They are the people who will have to pay the additional income tax the Chancellor has imposed.
§ Mr. Heath
One of my hon. Friends shouted to the hon. Gentleman, "The printers". They form rather an obvious example. Such men are also to be found in the engineering industry and the motor industry. There are many in the construction industry, and now there are those mining at the coal face. They are the people who will be paying the extra income tax imposed by the Chancellor.
The other point is that, whether they earn up to £54 or above, people will be paying additional indirect taxation. That was a significant figure which the right hon. Gentleman omitted from his statement. He told us what would be the effect of the food subsidies and then added the effect of the increases in indirect taxation. He did not tell us what the total effect of that plus the increase in nationalised industry prices would be.
The subsidy problem is one which we faced as well. The Chancellor is increasing food subsidies, with the milk subsidy alone going up to £310 million. He argues that it is a necessity of life and that the subsidy is needed to help people, but at the same time he is putting up the price of other necessities, such as electricity, which people must have, coal, which they must have, transport, which they must use, and Post Office services, which they must use. That is the contradiction into which the right hon. Gentleman has got himself to a serious degree. The figure we should like to know is the total impact on the retail price index of the food subsidies, plus the additional indirect taxation, plus the nationalised industry costs. What will be the impact on stage 3 and on the threshold? That is the figure that matters.
The rent freeze has been cited. That will put up the rates and the RPI. What makes the situation more difficult is that although the direct taxation provision is limited to £54 a week and above, that is a considerable sector. There are included in it many of those who are in the most powerful unions. At the same time, we must consider the impact on the RPI of 337 the right hon. Gentleman's measures. When we analyse the position the people will find out the cost of this Government.
It was interesting that the right hon. Gentleman said nothing about helping the individual house owner in any way. That is of great importance in the present situation. It seems extraordinary, the right hon. Gentleman having covered such a wide area, that that matter should have been omitted. I accept that the right hon. Gentleman dealt with second homes, but he said nothing about those with five homes.
We must consider the impact of the right hon. Gentleman's measures on the balance of payments. Little was said about it, apart from a limitation being placed on overseas investment. No doubt we shall hear more about that when the time comes. What will be the effect on investment at home? The right hon. Gentleman said that he wanted more investment. I do not see how anything which he has done will bring about more investment.
The right hon. Gentleman is again knocking companies. He has put up corporation tax and he demands advance payments of corporation tax from companies before companies have earned the profits with which they will pay corporation tax. How does he imagine that that will encourage more investment? Perhaps I have misunderstood what he said. In any case, he has put up corporation tax and is squeezing profits more.
It is not correct to say that there was a great increase in profits in 1973. It is necessary to take stock appreciation into account, which gives a firm nothing which it can spend and nothing with which it can invest. All that has happened is that stock has gone up on valuation and that it will have to be replaced at that valuation or at a higher price. When that matter is taken into account, profits in 1973 did not increase.
That has been the problem besetting British industry for the past 15 years. British industry has not enjoyed sufficient profitability. We went to great lengths to try to ensure that reasonable profitability could be obtained. I believe that the Chancellor has damaged that profitability. That factor is essential if we are to have an expansion of the economy.
I am not in dispute with the right hon. Gentleman when he talks about a united 338 nation and the need to improve the real standard of living. However, I believe that we cannot get a united nation and solve our social problems unless there is an expanding economy from which people can benefit. That is the only way in which it can be done. In my political life many other ways have been tried. I have now come firmly to the conclusion that there is no other way of trying to solve social problems except by a reasonable increase in total output which can be shared amongst the people.
Of course, the Chancellor is entitled to bring forward measures of egalitarianism to please his own party. I do not share his view that what he describes as the poor performance of British industry over the past 50 years is due to accretions of wealth. Let him argue the case for equality and egalitarianism on whatever basis he likes, but he is deceiving himself and everybody else if he believes that a lack of growth in the economy is due to such accretions of wealth as there may be in our society.
What does he think will be the wage pattern for the rest of the year'? When he was announcing different dates for the implementation of nationalised industry price increases, some of my right hon. and hon. Friends were watching the pattern which was emerging. The right hon. Gentleman said that it was to be November for coal. At that my right hon. and hon. Friends, with their political and suspicious minds, were thinking, "That means October." When the right hon. Gentleman came to July for electricity, my right hon. and hon. Friends thought, "That means June". When the right hon. Gentleman dealt with Post Office charges and said that they were to be dealt with straight away, my right hon. and hon. Friends thought, "It seems that it will be within the next three weeks". Of course, we cannot tell what will happen in the next three weeks.
I do not think that the Chancellor would like to lose this massive Finance Bill, which must now be ready, or the second Budget which he wants to introduce. It seems that he was doing that juggling whilst having in mind to do something with the threshold for stage 3 and the next stage of the incomes policy, without having a clue as to what that policy will be. That is why he is juggling with those dates.
339 Let him tell us clearly what will be the wages pattern for the rest of the year. He made no mention of the rate of growth for the rest of the year. Will he let wages rise and then tax them further? Will he try to get a reasonable arrangement either statutorily or voluntarily so that the pattern of wage increases is commensurate with growth?
I am glad that the right hon. Gentleman has accepted our main proposal for dealing with offsetting losses. [Interruption.] Oh, I regret that he does not accept it. It was a very good arrangement, and very necessary.
The right hon. Gentleman dealt with the proper sharing of North Sea oil profits. We have gone into that matter in great detail. It is necessary to clear it up as early as possible. It is clear that there are two major options. There can be carried interest in various forms. We believe that that should be introduced only for existing licences. A Government can do what they like with future licences. The other option is an excess revenue tax. However, there is uncertainty about the nationalisation of North Sea oil. I ask the right hon. Gentleman to clear up that matter as soon as possible.
§ The Paymaster-General (Mr. Edmund Dell)
Was the right hon. Gentleman negotiating with the oil companies for a carried interest on existing licences?
§ Mr. Heath
Not as far as I know. I think that if there is to he an arrangement it should be a voluntary arrangement which the oil companies can accept or reject. If some of them prefer to go for such an arrangement, that will be up to them. The Government can stipulate what they like regarding future licences.
We shall await a statement from the Secretary of State for Defence. The dismay on the faces of the right hon. Gentleman's hon. Friends on the back benches when he announced only a £50 million cut in defence expenditure was there for everyone to see. It gave us a certain satisfaction that the right hon. Gentleman limited himself to a cut of that size. I do not have much sympathy for the argument that since other countries are not doing what they should do, so we should not, either. Fundamentally, 340 it is our job to see that the Atlantic Alliance is effective.
What does the Budget amount to? Of course, we accept the blocking of tax loopholes of one kind or another, but within the Budget there are the usual pieces of petty spite. One example is employee participation, about which we have heard so much from the right hon. Gentleman and his colleagues. One practical example of Government help towards employee participation is the own-as-you-save scheme. The Chancellor is discouraging that scheme and putting it out of court. That I regard as purely doctrinal. It is unworthy of the right hon. Gentleman and I hope that he will reconsider the matter.
Once again we have a Labour Government who are running true to form. We see all the tax increases to which we are accustomed. We see an increase in income tax equivalent to the old 6d, which puts income tax back to where it was when the previous Labour Government left office. We see an increase in indirect taxation—on beer, spirits and tobacco. We see it on items which were taken out of VAT and which will now be subject to tax. It is exactly the same pattern which we have always had from a Labour Government—namely, increased taxation on companies and individuals.
The right hon. Gentleman, having promised so much, has found that he cannot raise the money from the rich. The amount which he is raising from them is really minimal. The great burden is being carried by the great mass of the people. That is the position in which he now finds himself. Since he has made promises and offered benefits, the whole country must now pay.
I find it depressing that there is nothing in the Budget which will encourage industry and those working in industry or which will encourage exports or change the balance of the export pattern. That is one of the principles to which the right hon. Gentleman has referred in the past. I find it particularly depressing that the attempt has been abandoned to try to create a modern efficient and effective economy which could produce the benefits which the people want.
I know how much pleasure it gives to get rid of this project, that project and the other project. We now know that 341 the examination of Maplin is a sham. What will happen to Concorde? There may be a breach of a treaty. The right hon. Gentleman's predecessor tried that when he was Minister of Aviation and he failed. There is no real attempt to evaluate these matters in the national interest.
The right hon. Gentleman has decided to go for the usual Socialist policies of increasing taxation, of squeezing the profits, of giving no additional opportunities or incentives to those who work in industry or to those who produce the goods or to those responsible for our exports. The right hon. Gentleman may think that by producing so many benefits he is achieving great short-term popularity. He may have done it, but while he was speaking it did not seem that he was producing even that popularity with his own party, and certainly he will not do so with the country. I must tell him that in the longer term I do not believe that he has in any way risen to the needs of the occasion in his proposals.
§ 6.21 p.m.
§ Mr. John Horam (Gateshead, West)
I give a warm welcome to my right hon. Friend the Chancellor of the Exchequer's Budget. I say that the more strongly because, as he will remember, I put to him criticism of the sort of Budget which I felt was being urged upon him by some of the more deflationary commentators. They attributed to my right hon. Friend deflationary views which, I am glad to see, are totally belied by his performance today.
I speak as someone with a certain bias as a member of the expansionist element of the Cambridge school. Most of us who follow these economic and financial matters with interest will have read the correspondence in The Times between various commentators and experts. They said, first, that there should be an element of deflation and, secondly, and more lately, that there should be an element of expansion. The two views were quite consistent. The right hon. Member for Altrincham and Sale (Mr. Barber) deflated the economy to some extent in his December mini-Budget, and it is, therefore, consistent that those who urged a certain amount of deflation before Christmas should now be urging a certain amount of inflation, or, at least, no 342 deflation. I am glad that my right hon. Friend has produced a Budget which I can warmly welcome in these terms. The Budget is mildly deflationary, but extremely mildly. In fact, the reversal effect is about £200 million—almost neither here nor there and well within the usual statistical margin of error.
I am glad that my right hon. Friend will present another Budget later this year. I have always thought that the long marathon Budget, presented at a time of year not always the best chosen to give a broad and correct view of the economy, was a mistake and that we ought to have a more ongoing monitoring arrangement, a chance to look again at the economy during the year. I am glad, therefore, that my right hon. Friend has reached this logical conclusion. He goes further than any previous Chancellor has gone in that respect and has adopted a modern-minded approach.
My right hon. Friend's approach is broadly right in terms of his Budget judgment. The world as a whole faces the possibility of many economies simultaneously entering a period of recession or at least of less than the fast growth they have been used to in past years, particularly last year. In such circumstances, it is important that we should not add our mite to the total amount of recession and deflation in the world. This should become apparent later in the year, and for these reasons my right hon. Friend has chosen the right path.
Secondly, I welcome the Budget on the ground that my right hon. Friend strongly argued, that it is a redistribution Budget which is trying to make our society more equal. That must be the basis for action, not only in terms of human affairs and a more reasonable society but in terms of efficiency as well.. The right hon. Member for Sidcup (Mr. Heath) has said that it is basically all about efficiency, but I do not believe that efficiency can be achieved without a certain effort to make society less unequal and less unfair. I do not believe that these two aims are contradictory. Indeed, they go hand in hand.
The confrontation, unease, anxiety and loss of production we have seen over the last few months as a result of the effort to concentrate solely on efficiency is proof of the argument that efficiency 343 and a fairer society go together in forming the right basis for a modern economy. This entails a degree of equality which is broadly acceptable to the mass of the population, and I believe that the mass of our people think that our society is more unequal than it should be. With this Budget they will think that it is now becoming more equal and that the Government on the whole have taken steps along the right path.
I welcome my hon. Friend's statements about food subsidies and that he has kept to the Labour Party's commitment regarding the general level of the subsidies expected—about £500 million in the financial year. I reject the point made by the Leader of the Opposition that all this will be going on to milk. My right hon. Friend pointed out that the details have not yet been worked out, and we know from what my right hon. Friend the Secretary of State for Prices and Consumer Protection has said that this is a difficult and complicated matter that cannot be worked out in three weeks. My right hon. Friend added that the Government are committing themselves to a broadly-based attempt to hold down prices of various basic commodities but that they cannot entirely foretell what will happen to individual prices; the Government will, however, do their best to distribute the £500 million in a way which will help the consumer best. This approach by the Government is sensible, and by no means commits them to the sort of strange, open-ended policies which the Leader of the Opposition claimed were inevitable from what the Chancellor said. Quite the contrary.
Thirdly, we all welcome, whatever our party affiliations, the increase in pension to £10 for a single person and £16 for a married couple. This, again, was a Labour Party election commitment. I also welcome the skilful way in which my right hon. Friend is paying for it. As my hon. Friend the Chief Secretary to the Treasury is aware, I advocate the idea of abolishing national insurance contributions—at least, for employees—altogether, raising the equivalent amount through ordinary income tax. I am sorry that my right hon. Friend has not made that change, but I did not really expect that he would. My right hon. Friend's decision, carried out rather subtly, to 344 avoid placing the largest burden on those with the lowest incomes is an example of his approach. He is scaling the increased contributions very skilfully.
In order to pay for the undoubted advantages which we are to get by increased pensions, food subsidies and more housing, my right hon. Friend has also been extremely skilful, except in one respect. The cut of only £50 million in defence expenditure has disappointed many of us on this side of the House, although it will have heartened some hon. Members opposite. It seems a tiny amount compared with the sort of defence cuts to which the Labour Party is traditionally and rightly committed. I do not think that arguments about relative degrees of selfishness hold much water. A modern society should not be committed as much as we are to defence expenditure when one looks at all the other claims on our money. I was proud of the reduction in defence expenditure achieved by the last Labour Government, who brought it below the level of spending on education, and I would like to see that happening again. But £50 million is but a derisory advance towards that objective.
I welcome the reference to Concorde, which should long ago have been got rid of. It has never been the type of project in which we should have invested so much money. I have always been equally opposed to the Maplin project, although less opposed to the Channel Tunnel project. I welcome my right hon. Friend's statements on these matters. I hope that the Government will protect the employment prospects of the people of Bristol and that the rundown of Concorde is done in a sensible and humane way. The Concorde is the wrong sort of investment for the United Kingdom at this time.
The other main element in the Budget, apart from expenditure cuts, is the increase in income tax. Again I thought my right hon. Friend's Budget Statement extremely skilful, and that he is being egalitarian in his approach. Everyone earning less than £54 a week is better off than he was before the Budget. That is a Socialist Budget and a sensible, fair approach towards raising the money needed for higher pensions and subsidies.
The Leader of the Opposition said that the burden would fall upon those earning 345 more than £54 a week. That is so, but little extra will fall on those earning from £64 to £74 a week. The increases imposed upon people in that category, which may include some better paid manual workers, will not be large. Certainly in my constituency—and this probably applies the more as one goes north—there will be very few people earning as much as £54 a week. The broad mass of the electors will be earning below that level. It will not hurt the ordinary person, the man in the back street. He will be better off as a result of the Budget.
I welcome my right hon. Friend's commitment to wealth and capital taxes. I recognise that they cannot be introduced at once. There must obviously be discussion and further talks. Plainly, proposals were not in a shape which would allow legislation at this stage. I urge upon my right hon. Friends an early consideration of additional taxation to deal with property gains, whether in terms of a land value tax, which the Liberals espouse, or in terms of a tax on unrealised gains, which my hon. Friends and I were thinking of before the election. The latter method is to be preferred.
This is not a spiteful Budget, as the Leader of the Opposition suggested. That suggestion comes from the leader of the party whose manifesto spoke about taking away benefits from the wives and families of strikers. That is spiteful. The things proposed here are by no means spiteful in comparison. It is, broadly, a Budget which achieves the right fair-minded approach to a modern society, an approach which can be a basis for true efficiency. It is a Budget which I feel sure will receive the general and warm approval of my hon. Friends.
§ 6.32 p.m.
§ Mr. John Wakeham (Maldon)
I am grateful to you, Mr. Speaker, for being called upon what is one of the most important days in the parliamentary year. I listened to the hon. Member for Gateshead, West (Mr. Horam) with perhaps less attention than I would on other occasions because in my mind there was the possibility that I would be able to catch your eye. None the less, I listened to his speech as much as I was able.
346 Since this is my first opportunity to address the House I wish to pay tribute to my predecessor, Mr. Brian Harrison, who served in this House for nearly 20 years and who has a fine record of public service to his constituents and to this House. He will in particular be remembered for his great efforts in encouraging better relations with the Commonwealth and for his interest in Community matters. I know that he will be continuing this work outside the House and I feel sure that his many friends inside and outside the House will want to join me in wishing him all success and happiness in his new activities.
In a way I have two predecessors—Brian Harrison for the northern part of my constituency and my hon. Friend the Member for Essex, South-East (Sir Bernard Braine) for the southern half. As my hon. Friend is very much with us in this House it would be impertinent of me to say anything about him except that on occasions I shall be giving him support in his proposals for stopping the development of Maplin—an issue of great concern to our constituents. I hope that the Government will reach a speedy conclusion on this project.
My constituency is at once unique and typical. It is unique in that it is the only constituency in the country in which it is impossible to cross from the northern to the southern part without either getting one's feet wet or going through two other constituencies. My constituency is divided from east to west by the River Crouch. We have no bridge across that river throughout the length and breadth of the constituency.
It is typical of many other constituencies in that at first sight it appears to be a mainly agricultural constituency. Farming is certainly an important industry there. We have some of the finest farmers in the country. There is also a considerable amount of light industry and a large number of commuters travel daily into Liverpool Street.
The principal town in the north of my constituency is Maldon which remembers very well the visit of Her Majesty in 1971 when we celebrated the 800th anniversary of the granting of our Charter in 1171. The principal town in the south is Rochford, which has also Royal associations in that it was the home of Anne Boleyn for the greater 347 part of her childhood. Most hon. Members know what happened to her.
In Maldon we have the sort of problems that are to be expected. The vast majority of my constituents are not represented by the trade unions. The CBI does not consult them frequently on day-to-day problems. To a large extent they rely on their own efforts to improve their standard of living and upon the Government to see that they get a fair deal.
This is my first speech and I gather that the convention is that I should be noncontroversial in what I have to say. As we have just had a Budget Statement and no doubt everyone is busy thinking of the finer implications I want to make two suggestions, neither of which is particularly controversial in a political sense which I think will be of help to my constituents. By profession I am a practising chartered accountant. My suggestions, if adopted, will not enhance the income of myself or my fellow practising accountants. Indeed, I hope that they will substantially reduce it over the years.
I refer to the issue of tax simplification. I hope that the Chancellor will continue the work of my right hon. Friend the Member for Altrincham and Sale (Mr. Barber) who made such great steps in reforming the tax system during the past two years. Urgent steps must be taken to reform our system of personal taxation. I would like to see us reach the point when a reasonably educated man would be able, without a great deal of difficulty, to work out his personal tax liability using a simple system of self-assessment. There is nothing particularly difficult or complicated about this. It is done in many parts of the world.
It requires a new set of forms and greater use of computers. It also requires —and here there may be additional work for my profession—a comprehensive system of auditing assessments. The corollary is that there should also be higher penalties for those who evade paying taxes. There is certainly room for improvement in our system of collecting personal taxation.
Secondly, I remind the Chancellor that in framing his new tax legislation his principle responsibility is to ensure that the 999 honest people who wish to discharge their liabilities are able to do so 348 easily and efficiently. I agree that he has also to frame his legislation in such a way that the few people who are dishonest are caught by the system. There is a danger that the Inland Revenue, in its natural desire to close loopholes in the tax system, is tempted to make the legislation so complicated that ordinary people find it difficult to know—and professional advisers find it difficult to advise them—exactly where they stand with the legislation. We shall obviously have some more complicated legislation to put into effect the proposals that have been made today.
I welcome the proposal to publish a wealth tax Green Paper. That will enable hon. Members and professional people to have the opportunity of making comments and suggestions on the machinery of the tax.
The Chancellor's main responsibility is to try to ease the lot of the vast majority of people who want to discharge their liabilities, however onerous. I hope, therefore, that the work on tax reform and improving our system of tax collection will continue under this Government as it did under the previous administration.
§ 6.41 p.m.
§ Mr. Douglas Henderson (Aberdeenshire, East)
My first pleasant duty is to express the House's congratulations to the hon. Member for Maldon (Mr. Wake-ham) on his maiden speech. He confessed to being a chartered accountant by profession, but I am sure that we shall not hold that against him in his subsequent career in the House. He combined his accounting skills with the fluency of a skilled advocate. He was clear, lucid and informative. At times I felt that he could be persuasive. He spoke with great confidence, and we look forward to hearing from him on many occasions.
While I am in an agreeable mood I ask the Chancellor's colleagues to convey to him my appreciation of his performance This is the first occasion on which I have been present on Budget day. The Chancellor's speech was highly polished and sustained everyone's interest until the end. We may have our own views on certain matters contained in the statement, but the Chancellor is to be congratulated on the way he presented his proposals.
349 The Scottish National Party welcomes the proposed improvements in social benefits, particularly the higher benefits for pensioners. I hope that that proposal will meet with universal approval and acceptance. The proposal to restrain prices by the introduction of food subsidies will also be generally welcomed, but tempered by the bleak news of increases in the price of commodities that pensioners will have to buy. There are to be increases in the prices of coal, electricity and postal rates, and I understand that increased telephone charges are to come. All those increases, combined with the rate of inflation, which the Chancellor saw little prospect of reducing. will, alas, rapidly wipe out most of the benefits which the Chancellor proposes for pensioners.
§ Mr. Michael Latham (Melton)
Does the hon. Gentleman agree that, in addition to the matters he has mentioned, the 80 per cent. increase in rates which is proposed for my constituents will also bear heavily on many people?
§ Mr. Henderson
I am grateful to the hon. Gentleman for his comment. It allows me to omit a little of what I was about to say.
I am sorry that there has been so little appreciation of people's difficulty with mortgages. We in Scotland are particularly interested in this. Building societies in the past have taken far more out of Scotland by way of invested income than they have lent. I hope that the Chancellor will make sure that the increased appetite for private ownership of housing in Scotland is not undermined by the practice followed by English building societies.
The Chancellor said that the economy and the balance of payments deficit presented a sombre picture. I agree that the situation is serious, bearing in mind the deterioration in the balance of payments position, the growth in money supply and the trade deficit at the beginning of this year. The Chancellor referred to Britain's unique economic difficulties. In that context I am interested in his reference to oil being the means of solving all the problems within the next four years.
At the risk of being repetitive, I must reiterate what has been said in the past few days: do not depend on that oil 350 because it is Scotland's oil. My hon. Friends and I are here to get our own Government in Scotland, which will have control of our oil resources. If the United Kingdom is looking to oil for its salvation, it may be seriously disappointed. I wonder whether the massive loan which the Chancellor has obtained from overseas has been obtained on the security of Scotland's oil. If so, that security cannot be regarded as cast-iron for the future.
We in Scotland—and I think it is also true of Wales—are particularly affected by any tax which increases the cost of the transport of goods. The increase in the cost of petrol will put an added burden on consumers in Scotland. It is a tax on distance. I have received irate letters from constituents complaining that English companies which supply to every corner of England have a separate tariff for Scotland and charge an extra 10 per cent. to cover increased transport cost. We do not welcome an increased tax on oil, because it is a tax on distance.
That is true also of telecommunications. Telephone calls made from Scotland to places outside Scotland are almost all at the higher rate. The increase in rail fares and freight charges may have a serious effect on the Scottish economy. We are told that the price of gas is not to be increased, but Scottish consumers already pay between 33½ and 50 per cent. more than do consumers in the regions in England. It is said that it is England's gas, and we are certainly made to pay through the nose for it.
I ask the Chancellor to bear in mind the effect on the whisky industry of the additional burden it will have to bear. There is an imbalance in the taxation on whisky and beer. Hon Members may not be aware of the extent to which whisky rather than beer is drunk in Scotland. It is a sad blow to the working men in Scotland that the tax on whisky should have been increased so much, and we shall watch carefully to see whether it has an effect on the demand for whisky.
I welcome the Chancellor's comments on the prestige projects of Concorde, Maplin airport and the Channel Tunnel. These projects are of little benefit to Scotland's economy, and drain resources 351 from our economy to benefit already affluent areas. The Scottish taxpayers have paid millions of pounds towards the cost of Concorde, and I doubt whether we have received anything back in terms of wages or dividends. For Scotland it is money down the drain. I hope that the Chancellor's remarks foreshadow an early announcement that the project will be scrapped once for all before any more money is wasted on it.
My final point relates to cut-backs in public expenditure in Scotland. The Scottish economy has been seriously hampered by cut-backs in public expenditure announced last December and still in force. We have major projects with which we should like to proceed. Therefore, I would have liked to have had from the Chancellor of the Exchequer reassuring news that in Scotland—particularly in the north-east where local authorities are being expected to do so much to provide new infrastructure for oil and related developments—there would be some substantial relaxations to allow authorities to go ahead with their projects. We welcome many of the social provisions in this respect. We feel that in an independent Scotland we could do much better, and that is the message for the people of Scotland.
§ 6.51 p.m.
§ Mr. Giles Radice (Chester-le-Street)
I shall not take up the arguments deployed by the hon. Member for Aberdeenshire, East (Mr. Douglas Henderson), except to say that I was surprised, on occasions when he was not talking exclusively about Scotland, to hear him warmly welcome most of the Budget, because I feel that that will be the reaction of most people in the United Kingdom. I warmly welcome the Budget introduced by my right hon. Friend the Chancellor of the Exchequer. I congratulate him in producing, in three weeks, a Budget which normally take six months to produce. In that short period of time my right hon. Friend has produced a major Budget which in a number of ways is revolutionary, and he and his ministerial colleagues must be congratulated on the work which they have put in.
I am delighted with the economic effect of the Budget, which, broadly, is neutral. Some of us were slightly worried at the 352 advice which the Chancellor of the Exchequer was receiving since we felt that it was too deflationary, and we are delighted that he has not taken that advice. I emphasise that he has produced a Budget that is broadly neutral in its economic effects and I can only say, speaking as a trade unionist and as a Member of Parliament for a North-West constituency, that I am delighted with it.
From the point of view of social justice my right hon. Friend's Budget represents a decisive commitment to the kind of society that Labour Members would like to see. I can well imagine the distaste and chagrin of some Conservatives when they heard some of the things said by my right hon. Friend, but that convinced me that he was on the right lines in introducing his proposals.
The right hon. Gentleman the Leader of the Opposition made no mention of the depressing inheritance which my right hon. Friend took over and against which he had to present his proposals. The right hon. Gentleman did not mention the massive balance of payments deficit, which is of disastrous proportions, or the fact that we now have the highest rate of inflation since the war. He did not mention the failure of the Conservative Government's dash for growth and the fact that by the end of the year the growth rate had slowed down almost to a stop. He did not mention the effect of the three-day week or of the miners' strike. We heard nothing about those important matters. The right hon. Gentleman made no mention of the fact that the Labour Government came to power at a time when the country was more divided than it had been for many years. He did not mention that handouts to the better off had created a situation in which people felt that our society was unfair and that this was at a time when the provisions of the Housing Finance Act were forcing up rents.
The Conservative Government refused to do anything about food prices, and merely sought to lay the whole problem at the door of world prices, saying that nothing could be done about the situation. I am pleased that my right hon. Friend rejected that approach and said that the most important thing was to aim at a society governed by the principles of social justice.
353 I welcome three main advances made by my right hon. Friend, and I know that all Labour Members will join me in my praise for those proposals. I refer to the increase in pensions, the move to subsidise some main items of food, and the commitment on housing. We have already had a freeze on council house rents. We now have a commitment to begin to improve the rate of housebuilding—a process that was so disastrously slowed down under the Tory Government.
This is the framework in which we shall hope to create once again a more united society, and it is right that this should be Labour's approach. We also welcome the redistribution of income and wealth begun by my right hon. Friend's Budget and also the fact that he has taken away some of the handouts given by the former Conservative Chancellor of the Exchequer, the right hon. Member for Altrincham and Sale (Mr. Barber.) I do not believe that the present Chancellor of the Exchequer has gone far enough in dealing with property speculation. Furthermore, I understand that in terms of a wealth tax he will have to produce a Green Paper, but I think it can be said that he is on the right lines in what he has set out to achieve. We welcome what he is endeavouring to do.
We are grateful that my right hon. Friend has not dug a hole in the economy. He has not created unemployment, or any danger of it, at a time when the world economy is not likely to expand. I am delighted that he will have a second bite of the cherry, in the form of a second Budget. We must get away from the idea of an annual Budget, which is an old-fashioned institution. My right hon. Friend is right to tackle the two main objectives that he set himself—first, to reduce the rate of inflation and the massive Budget deficit that he inherited, and, secondly, to subsidise the main food items. He is also right to try to tackle some of the problems involved in the balance of payments deficit. I agree with him that this cannot all be done at once.
The fact that my right hon. Friend has managed to negotiate a long-term loan shows the confidence of overseas bankers in Britain and indeed in the new Labour Government. It must be pointed out that the Conservative Government did not obtain such a loan. I believe that this 354 shows that the Labour Government will last and that my right hon. Friend's Budget is on the right lines.
I am delighted that my right hon. Friend has not got rid of the regional employment premium. I am particularly pleased about this as a regional Member of Parliament for the North-East, and I know that everybody in that area will also be delighted.
I regard the Budget as fair-minded. I believe that it will be welcomed by the mass of the people, and certainly by the mass of my constituents, most of whom are not paid above £50 a week—whatever the Leader of the Opposition may think in his fastnesses. The broad mass of the people will benefit from the Budget. It cuts right across the social background. I believe that we can now begin to tackle some of the major problems that face us.
Debate adjourned.—[Mr. Dormand.]
§ Debate to be resumed tomorrow.