Orders of the Day — Finance Bill

Part of the debate – in the House of Commons at 8:58 pm on 20 July 1981.

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Photo of Austin Mitchell Austin Mitchell Opposition Whip (Commons) 8:58, 20 July 1981

I do not propose to follow the remarks of the hon. Member for Harrow, East (Mr. Dykes), who was defending, with irrelevant arguments, a policy of which he does not approve, as his speech made clear. The hon. Gentleman obviously has to attack the Opposition to cover his disloyalty to his own Government. Nor do I intend to take up the arguments of the hon. Member for Gateshead, West (Mr. Horam), who is now rapidly receding from the Chamber. The hon. Gentleman has been emboldened by the chimera of a moderate by-election success—all by-election successes except those at Grimsby are chimeras—into speaking and acting as a turncoat, attacking the party from which he sprang, to which he owes his seat and with which he basically agrees. That is a question of taste, but I note in passing that the hon. Member for Gateshead, West, on behalf of the Euro-fun party, pointed out in his speech on the Budget that he would expand the economy and pay for the expansion by increasing the standard rate of income tax. A slightly better proposal, according to the hon. Gentleman, would be to put a surcharge for one year on all rates of income tax. That comes from the man who accuses the Labour Party of wilful overspending. I agree with the hon. Gentleman that we must expand the economy but the expansion must be more vigorous than he indicated. We should pay for it, as he says, by increasing the public sector borrowing requirement and, if necessary, by increasing taxation.

In the main those who accuse us of misguided expansion must face the fact that the burdens of unemployment, lost tax, lost productivity, lost output, and the expenditure of benefits, particularly on unemployment benefits, are now a major drag and constraint on this economy. If we could ease those burdens, expansion would be possible—and expansion itself must ease the burdens.

Our main job today, however, is to say farewell—particularly those of us who sat with the Bill in Standing Committee and throughout the debates in the Chamber night after night—to a bad Budget. The essential fact is that in this Budget we are also saying farewell to monetarism—a policy that is now going out not with the promised bang of prosperity and growth, not with a bang but with a whimper, at the whim of the bankers who instigated it in the first place.

This Budget underlines all the faults of the monetarist policies with which the Tories came in. It is essentially a deflationary Budget. It is a deflationary Finance Bill at a time when the economy desperately needs an expansion of demand and the stimulus to get the economy growing again and to reverse the decline of the last two years.

In the period over which we have been discussing this Budget, all the evidence on which it was claimed by Conservative Members that it was based has changed. It is clear that the economic crisis is getting worse—not better, as they optimistically predicted before the Budget. Yet the Government have averted their face from this situation. The Chancellor has plodded on. Instead of relaxing, when his own Back Benchers allowed him the opportunity, the financial stringency and the deflationary impact of this Budget, he persevered and made the situation worse by the petty, vengeful increase in the taxes on tobacco, bingo, betting and gaming machines—the pleasures of the working man—to get his own back after what his Back Benchers have made him do.

It is too much to say that this Budget is irrelevant, because it is more positively harmful than that. This Budget is the revenge of the small-minded, monetarist dogmatists on the Conservative Benches who, as their only defence, bleated for so long that there was no alternative to policies which have been positively harmful to our economy that they are now well on the way to reducing the economy to a situation so disastrous that there really will be no alternative to the mess that they have created.

All the justifications for the Finance Bill, argued from the first, have now gone. Monetarism is an exploded economic philosophy. I quote from Professor Galbraith, writing in the latest issue of The New York Review of Books. He says: A case can readily be made that the English-speaking countries, the United Kingdom and the United States in particular, are currently getting the economic policy that they deserve. Theology, wishful thinking, and a modest resort to necromancy have extensively replaced practical judgment on both sides of the Atlantic. The results are in keeping. They are in keeping. We are now putting up with the disastrous results of that escape from reality.

Monetarism is a discredited philosophy. The hopes of revival that the Government hold out are themselves discredited. The hope of the unity of the industrial countries in deflationary policies has been removed by the expansionary policies which will now be adopted in France, and by the fact that the Japanese economy is still growing. The American economy, despite all the wilful perversity of the Reagan Administration, is still growing.

Today, the Chief Secretary says that the Conservatives never said that monetarism alone was enough; that fiscal measures were also necessary—although they did once give the impression that monetarism alone was enough. The fiscal measures that they are proposing in this Finance Bill will make the situation worse. The Government are now in a trap. Spending is rising remorselessly as the pressure of unemployment builds up, as more and more people are put out of work and as the decline of the economy hits the nationalised industries. With that, the Government's financial predictions will all go awry, because as spending rises the tax receipts are threatened by the same depression as that which requires the increase in spending. That is the cause of the "we need the money" syndrome that the Minister treated us to so liberally in Committee and that excused all the petty increases in taxation and the Government's failure to increase allowances. Indeed, that was probably the most monstrous aspect of the Budget.

At the end of the "we need the money" syndrome, which has been produced by the economic decline that the Government have generated, we find that the average family will pay more. Instead of starting to pay tax at 45 per cent. of average earnings, tax will start at 38 per cent. of average earnings. The basic rate will be increased from 25 per cent. for the lowest payers to 30 per cent. In the Conservative Party's manifesto, hopes were held out of eliminating the poverty trap. However, it will become wider and deeper because the numbers of those in it will increase by about 40 per cent. In addition, we must consider the way in which the Government are treating single women aged between 60 and 64, with their "little pensions".

The final obscenity is that in addition to those increases in taxation the Government have cut capital transfer tax for the very wealthy. They have given a straightforward set of handouts to a class that toil not, neither do they spin At the same time they call for sacrifices from the rest of the community. The only consolation is that the Finance Bill will be the swan song of those narrow dogmatists who have dominated Treasury policy for so long. The change will be forced not by the miners, the Government's Back Benchers or the Minister of Agriculture, Fisheries and Food—who is the siren voice of a Government on the rocks—but by the burning that has taken place in the cities of our blighted Britain of 1981. That will force the Government to change their policies and to start the expansion that they have long told us is impossible. That will be the result of the policies embodied in the Bill.

The Government will change course because their policies are in ruins and the longer they persevere with such policies the bigger will be the dose of Socialism, of Government spending and of Keynesian stimulus that will be needed to get the country out of the mess that they have created. In addition, there will be a greater need for planning and for the arts that we have advocated for so long. Those arts alone can turn the Government round. Recovery will not follow inevitably, as night follows day, as the Chief Secretary told us. It must be worked for, spent for, planned for and engineered. The Government will have to turn to those arts—which are alien to them in the desperate situation to which they have reduced Britain. They will change course. The Finance Bill is the last monument to the dead sheep, the Chancellor of the Exchequer.

To say that the economy has been savaged by a dead sheep is perhaps too facile an image. That savaging has caused disastrous damage to an economy that can ill afford to suffer. The budget makes the damage worse and must be the sheep's final whimper before it is carried off to the last resting place of dead sheep, namely, the Woolsack. The Government will need to make that change of leadership and of policy. They must admit the truth, namely, that they have wilfully pursued wrong policies for too long and have taken the country down a disastrous road. They have wasted precious time and precious jobs.

British industry has lost one in eight industrial jobs during the two years in which the Conserative Party has been in office. The Budget has made everything worse. It will be reversed because it must be reversed.