Mr John Horam (Gateshead West)

I am the second in the course of this debate to go through the hoop of making a maiden speech. Like the hon. Member for Leek (Mr. Knox), I, too, am an economic consultant—which just shows how economists can differ but also, perhaps, how they can have politically different beliefs and a different understanding of the condition of the people, some right and some wrong.

I might also add for the benefit of the hon. Member for Harwich (Mr. Ridsdale) that I am a member of the Transport and General Workers' Union. I am sure that Mr. Jack Jones, to whom the hon. Member referred at considerable length, is quite capable of defending himself. I would simply remark that if the hon. Member was doing as much for old-age pensioners as Mr. Jack Jones is doing for them, they might be a lot better off than they are today.

I should like to begin, as I have observed is the custom, by referring to my predecessor and to my constituency. My predecessor was Harry Randall, who began his working life as a postman. This, together with a warm and kindly heart, gave him a fine understanding of working-class people. I can tell the House that he is much loved in the constituency and since I have come to this House, I have found him to be much respected here.

The constituency which he represented, and which I now represent, is Gateshead, West, in County Durham. Gateshead was described in the nineteenth century as the dirty back lane which led to Newcastle. It can no longer be so described, because as a result of a sustained effort, led by an ambitious—and Labour—council, it has wrought a transformation which is quite remarkable to see, particularly during the last five or six years. Now, as a result of a naturally superb setting on the banks of the Tyne and the homogenous and excellent community spirit among its people, the possibilities for pleasant urban living are extremely exciting.

I believe that the measures which the Chancellor of the Exchequer has proposed will bear particularly hard on people living in towns like Gateshead in development areas. To begin with, however, I want to go a little behind the detail and talk about the philosophy behind what the Chancellor said.

It appears that the Conservatives believe that they have a philosophy, or, at least, a fig leaf of a philosophy, even if we on this side believe them to be totally naked. They seem to be saying, "All right. There may be some inegalitarian aspects in what we are saying"—despite the double talk here, some of their supporters outside scarcely trouble to deny this—"However, we will enhance personal freedom and choice and, secondly, by reducing personal taxation, increase incentives and, therefore, increase also the rate of growth." I believe that in all these respects they are making large claims, and utterly mistaken ones.

First of all, let us take the case of personal freedom. Of course, there is an economic aspect of personal freedom just as there is a political and an industrial aspect of personal freedom. The greater the resources an individual possesses, the freer he is, but how does it enhance personal freedom to allow a person to retain after tax more of the money he earns if we cancel out entirely the amount he thereby saves by charging him more for the things he must spend on, things he cannot do without? Yet this is the net effect of the Government's measures.

There has been some statement by the Chancellor today about exactly where the line may fall. He has said that a man earning £20 a week, and with a wife and two children, will be no worse off. I am surprised if he can maintain that, without including elements such as family allowance in the total £20 of income which the person is receiving. I would be very surprised indeed if they were straight earnings. Quite apart from that, it does not touch the case of the average industrial workers who are earning rather more than that—not very much in my part of the world, but more than that. They will be worse off under the measures which the Government are taking.

This is the nub of the matter. To attack equality in the circumstances of Britain today is also to attack freedom. Indeed, since we know that a £ is worth more to a man with £20 a week than it is to a man with £4,000 a year to take from the one and to give to the other is to diminish the total welfare accruing from our resources to the whole community.

But, the Government will say, this is too static we are to get economic growth for all the incentives we are giving. One would think from that, since it is so much the keystone of their argument, that there was some definite, proven, perhaps even quantifiable, link between changes in marginal rates of personal tax and increases in productivity. But there is no evidence of any kind to support such a contention.

Some hon. Members may have seen a fascinating television debate two or three weeks ago between my hon. and learned Friend the Member for Lincoln (Mr. Taverne) and the right hon. Member for Taunton (Mr. du Cann). I think my hon. and learned Friend the Member for Lincoln won hands down, but the right hon. Member for Taunton was faced with the same problem as the Chancellor was faced with today: how to produce some evidence that there is a link between small marginal tax changes and incentives to productivity. He could produce no evidence. All he could do was to trundle out Sir Paul Chambers, who, to his consternation, said he did his job for fun. My hon. and learned Friend the Member for Lincoln was able to produce good sociological evidence that there is no link between small changes in taxation and incentives. Indeed, I believe that if he would look further he would find other evidence from sociological studies and human behaviour of this kind which would indicate the same thing.

If there is any connection at all, it is the other way about. By reducing taxation we can have a disincentive effect; a man may work less hard if his tax is reduced. Now, as we know, the average man's conditions are changed so that he is worse off as the result of the Government's tax and other measures. So if they hope by these means to get increased productivity they should at least be honest enough to admit that this is not a carrot which they are using but a whip.

Quite apart from sociological studies of human behaviour, there is not even general statistical evidence to suggest either that Britain has a uniquely high level of personal taxation or that taxation in toto, or that high or low taxation, is linked in the same way with slow or fast growth.

The Chancellor said in his speech that the public sector accounted for 50 per cent. of the gross domestic product of this country. I think that is a questionable statistic to use in the context of this debate or in the context of his statement. I say it is questionable not because I think it is inaccurate in itself, for the Chancellor was accurate as to that, but because we are talking about Government expenditure and taxation, and taxation as a proportion of gross domestic product is, as my right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkin) pointed out, 20 per cent. to 25 per cent., depending on how one looks at it, below 50 per cent. This defines taxation as including social security contributions as well as rates and all types of taxation. By this measure we find that Britain is indeed not at the top of any international league table. As my right hon. Friend said, it is somewhere in the middle. The Scandinavian countries, as the Chancellor instanced, are higher than we are; so also is France; West Germany and the Netherlands are roughly at the same level as we are. Japan is the only major industrial nation, with the United States, which is significantly lower. The same is true if we limit the comparison to personal direct taxation. The only area where we are unique is in the slowness of our growth.

So it is obvious that there is no connection between high taxation and slow growth. Indeed, if we are perfectly honest economists we must say that we do not always know what economic growth is caused by when it appears. But it certainly has to do more with other matters such as those mentioned by the Leader of the Liberal Party; more to do with changing the exchange rate at appropriate intervals, trying to match an increase in money rates with an increase in productivity, having a proper plan for the allocation of resources. All these factors have far more to do with achieving fast growth than taxation. Indeed, when the history of this period comes to be written we shall find that the theory that high taxation and slow growth are inevitably linked will be regarded in much the same way as the old idea which was once popular that trade cycles are caused by the incidence of sun spots. But, then, Tory economists are always centuries behind the times.

In short, there is no substance to the Conservative contention that they have a positive side to their philosophy. It is no more than a blind assertion, and the trouble with this ideological approach to things, which equates national spending with original sin, is that it does untold damage. It does damage in that there are many areas where services are best provided collectively. Not only that, but there are an increasing number of these fields—I am thinking of development planning—where we are best to adopt a collective approach. This is the positive case for increased public spending, and rational and commonsensical decisions are made far more difficult by the smear attacks of the Government on public expenditure. Not only that, but that attack by the Government does direct social damage and increases inequality.

I said at the start of my speech that it is towns like Gateshead which bear the brunt of this kind of proposal. This is indeed the case. It is towns like Gateshead which have few of their population in the more affluent bracket and more in the average or worse than average bracket. It is towns like Gateshead, in development areas, which rely more on social services than the towns in more affluent parts of the country, and it is these services which are being made more costly. It is towns like Gateshead which, precisely because they are not affluent, attract less private investment, and, therefore, rely more on public investment and regional policies, which the Government are paring down.

Capitalism is centripetal; that is to say, the rich get richer faster than the poor get less poor. This applies to people, corporations, regions and countries. As a result of this philosophy, the development regions lose people, they have fragile economic structures, immense social harm is caused, and generally the material quality of life is less good. In addition to that—and this is the irony of it—the rich regions also suffer, because they have to receive fresh waves of people from the North, East or West who are seeking greater opportunity in more affluent regions. The people who come have to be transported, fed and housed, and they want to join in the entertainment and fun like everybody else. So problems are created of pollution, isolation, high house prices, loneliness and all the other difficulties associated with metropolitan big city living. Ghettoes tend to be created inside big cities because the rich can buy themselves out of these problems and the poor cannot. They may buy themselves out by buying a small house in a relatively poor part of London for a fancy price, thereby actually worsening the lot of the poor people. There is, therefore, a threefold effect, and all these problems can be helped by a proper, rational and forceful regional policy.

The last Government had a regional policy. It was not perfect but it is incontestable that it improved the development of intermediate regions. It is equally incontestable that it did not do enough. If there is something to be said about regional policy, it is that it should be strengthened and improved.

What the Government have said so far about regional policy is ominous. First, they say that they have maintained the status quo on investment incentives, but we have yet to see whether they have. Because of the new methods adopted by the Government the calculations cannot be done in advance. We cannot see precisely whether the total amount of money they are pumping into the regions is less than it was. But they have only maintained the status quo; they have not improved the situation.

Equally, during the period of the election the Conservatives told us that they wanted to switch spending from investment incentives of one kind to infrastructure grants. So far there has been no attempt to do that. We have heard no word of any attempt, and all we know is that total spending will diminish. Therefore, I say that what they have said so far about regional policy is deeply disturbing.

Finally, I offer an interesting reflection on the politics of this country. Gateshead is in County Durham. If everyone in the last election had voted as Durham voted there would not be a single Conservative Member of the House of Commons. I add, in fairness, that if everyone had voted as Surrey voted there would be no Labour Members in the House of Commons. If the net effect of the Chancellor of the Exchequer's statement last Tuesday and the policies which the Government intend to pursue will not be to make Surrey more Conservative, it will certainly be to make Durham more Labour. Therefore, any talk from the Government benches about building one nation is absolute cant.

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