Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 8:47 pm on 21 March 1988.

Alert me about debates like this

Photo of Mr Dafydd Wigley Mr Dafydd Wigley , Caernarfon 8:47, 21 March 1988

Earlier in the debate the leader of the Liberal party, the right hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Steel), spoke of the Budget reflecting a warped society. That is very much my feeling as well. It was interesting to read in The Times this morning of a leading industrialist referring to the cut in the top rate of income tax from 60 to 40 per cent. as obscene. That is a comment that comes to mind now.

That is not to say that the Budget does not contain a number of detailed changes that most hon. Members welcome. We certainly welcome the change in the marriage allowance—as far as it goes—the leaded petrol change, the change in company car perks, the forestry changes, and, indeed, the increase in tax thresholds over and above what is necessary to deal with inflation. Those changes, however, although important in themselves, are relatively trivial in comparison with the strategic error which I believe has been made in the Budget and the social insensitivity that it reflects.

The Secretary of State for Employment tonight made what must have been one of his shortest speeches at the Dispatch Box, even allowing for interventions. I well understand that, given that the references to employment in the Budget were so sparse. Indeed, I could point to only two such references in the whole of the Chancellor's speech. It is from that viewpoint that I want to make my contribution to the debate, because, more than any other, that is the viewpoint from Wales.

We suffer continuing high unemployment. The official figure is now 140,000 compared to about 90,000 when the Government took office in 1979. That is in spite of changed definitions and the effect of part-time work and all the other things. Pwllheli, which has one of the two employment exchange areas in my constituency, has an unemployment rate of 24 per cent. That is what we have to live with, and we looked to the Budget for a solution to the problem, but we sought in vain.

The Chancellor said that the reduction in unemployment as a result of the Budget would be at a reduced rate compared with what had been happening to unemployment figures in the past year. That hardly gives us confidence, faced as we are with such a level of unemployment. In spite of the pleasant perspective from which the Budget is viewed in Tory constituencies in south-east England, it is looked at quite differently in areas such as Gwynedd and in the old industrial valleys of south Wales.

That brings me to the heart of the Budget strategy. The Chancellor mentioned unemployment only twice, and clearly the Budget has nothing to do with jobs. It seems to be geared to the top 5 per cent. of earners. It is revealing to look at what the Chancellor said about the public sector borrowing requirement when introducing his 1987 Budget: We have now reached what I judge to be its appropriate destination—a PSBR of 1 per cent. of GDP. My aim will be to keep it there over the years ahead. This will maintain a degree of fiscal prudence that, until this year, had been achieved on only two occasions since 1950.Accordingly, I have decided to provide for a PSBR in 1987–88 of £4 billion."—[Official Report, 17 March 1987; Vol. 112, c. 818.] If that strategy to have a £4 billion PSBR was right 12 months ago, by what token is it now not appropriate? If it was a valid, stable and sustainable position 12 months ago, why has it now been abandoned? Why have the Government carried out a considerable U-turn on this matter? The Chancellor is deliberately going down a path which he describes as one of prudence and caution, and is going for a Budget surplus of £3 billion compared with a £4 billion PSBR last year. That is a difference in strategy of £7 billion.

The Budget surplus gave the Government a choice between attacking unemployment and lining the pockets of rich people. If the Chancellor had stuck to last year's strategy of a deficit Budget of about £4 billion, instead of aiming at a surplus of £3 billion, he could have triggered a public investment capital programme of about £7 billion. That would have been worth at least about £350 million to Wales in the form of hospitals, schools, roads and housing investment. It would have created at least 10,000 to 15,000 new jobs in each of the counties of Wales and brought an end to our jobless nightmare. Instead, he has given the money away in tax relief to his richer cronies at the expense of deprived people, not only in Wales, but in other places where the standard of living is low and unemployment is high.

That sort of investment programme could have been achieved within the parameters of the 1987 Budget review and economic assessment. If it is too risky in 1988 to go down that sort of road, he could have forgone some of the tax relief given to those on top incomes. If the money had been used for capital investment, that would have avoided sucking in imports in the way that that is likely to happen because of the tax cuts. It could have been the basis of a direct investment regional policy, but a regional policy appears to have been abandoned by the Government.

If the cost of capital had been brought down by interest rate cuts of a more substantial and significant nature than we have seen, that would have triggered industrial investment and induced ventures which at the moment are regarded as marginal to go ahead. If lower interest rates were to lead to a lower rate for the pound, that would be of benefit to exporters and would lead to increased demands from manufacturers. What I have suggested would create a coherent whole and could have been an alternative strategy for the Chancellor. All logic points to interest rates that are lower than those that currently exist.

From the point of view of my area, a third element in the Budget is open to criticism. It is the priority given to indirect taxation policy. The increase in petrol prices will be a further blow to rural areas in Wales, Scotland and England. The increase in petrol duty contrasts with the policy of retaining the current level of duty on spirits. The balance struck by the Chancellor is not acceptable.

Another major problem in Wales, which also exists in some other older industrial areas, is substandard housing. The Budget does nothing to help there. Indeed, it takes away the possibility of some tax relief for modernisation. It still allows tax relief to those on the top rate, because at the top rate of income tax a mortgage of £30,000 can qualify for relief. This year of all years, and bearing in mind the giveaway to those on top rates, there is surely a case for restricting mortgage tax relief to those on standard rate, because the resources thereby made available could be used for other purposes, such as spending on those who have greater housing needs.

I have spoken about my constituency problems and about unemployment in Wales, but we also have a major Health Service crisis. In Gwynedd, five cottage hospitals are lined up for closure because the Government have not made available to the health authority adequate resources to keep them open. Towns such as Portmadoc, in my constituency, will not have a hospital at all as a result of the Government's policies. The money being given away by the reduction of the top rate of income tax from 60 to 40 per cent.—about £2,000 million when indexed—is almost exactly what the NHS needs but is not getting. It is immoral of the Government to give away such amounts of money to top earners when people who need vital services cannot get them.

Those who benefit from the reduction in their income tax should remember that the cut has been delivered at the expense of their neighbour's hospital bed. The price of their handout may be that a friend fails to get kidney dialysis. It may mean that when the son or daughter of one of these high earners has an accident no ambulance will be available. There is no such thing as a free handout, and the handouts in the Chancellor's Budget will be paid for by a reduced Health Service and, sadly, human lives. That epitaph on the period of office of the Chancellor is at one with the Thatcherite priority of private greed over public need.

We have to wait to see what will happen to the Health Service, whether additional resources will be made available next month and the month after. It is tonally unfair for the Health Service, which has to run a coherent budget, to have to wait until the new financial year opens before it knows where it stands. Budget day was loudly advertised as NHS day, and rightly so. The issue of the Health Service was rightly the centre of focus. The National Health Service does not need one day of attention, but ought to be given priority all year.

If this battle is to go on, as it should, in what way can the Government have the message brought home to them that their policy is not acceptable? The running down and closure of hospitals was not part of their election manifesto, nor was the reduction of the top rate of income tax to 40 per cent. The Government have no mandate for such priorities, and it is up to the Opposition parties to make life so intolerable for the Government that they cannot and will not go ahead with such policies. That is a challenge to all Opposition parties. On this issue our message to the Leader of the Opposition is, "For goodness sake, do not go gentle".

This is a Budget for the south-east of England, or at least for some parts of the south-east, because there are pockets there which suffer from deprivation. The Budget does little for those facing unemployment or for those whose homes are not in good repair, but for those who have no unemployment problems, who have good quality housing and can afford private health care, and whose income levels are twice those in Wales, it is a good Budget. Few people in rural Wales or the industrial valleys of Wales receive £0·25 million a year and will be £800 a week better off at a time when we cannot afford to increase and index child benefit.

This Budget takes a massive double backward step towards a second Victorian era. A rich elite is growing fatter, while poor people are getting poorer. The richer regions will prosper, while the depressed regions will decay and disintegrate. This is the most class-based Budget of a generation and must surely trigger a political reaction among all decent-minded people.