Orders of the Day — Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 7:46 pm on 6 December 1993.

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Photo of Mr Dafydd Wigley Mr Dafydd Wigley Leader and Party President, Plaid Cymru 7:46, 6 December 1993

I should like to say a few nice things about the Chancellor's first Budget, but I find it rather difficult. I certainly agree that we need a new apprenticeship scheme, although I think that the provisions should go much further than has been suggested. I also welcome the proposal to offset the cost of child minding, and the moves to charge interest on the late payment of commercial debt—along with certain other provisions for small companies. I regret very much that the retirement age for women is moving up to 65 rather than men's retirement age moving down to 60; much-needed jobs could have been created. I also fear that the changes in sick pay may result in the moving of state responsibilities to the private sector, and I greatly regret the erosion of student grants. Many low-income families have an understandable fear of loans, and will not accept a loan-based regime for university education.

My main worry, however, concerns the total lack of basic strategy in the Budget. I fear that taking £11 billion out of the economy will undermine any possible upturn. It was interesting to note that those points were picked up by the more serious newspapers over the weekend. An editorial in The Observer commented: behind Mr. Clarke's glib manner and slick presentation lies the most deflationary Budget in recent history. The Budget is a serious gamble with the current economic recovery … Far from being designed to reduce unemployment, this Budget is likely to increase it". Another editorial, in The Sunday Times, observes: Next year alone more than £11 billion will be taken out of the economy in extra taxes and reduced public spending. That might not be enough to abort the recovery but it hardly helps promote vigorous growth after the longest recession since the 1930s … The government's position would be more comfortable if the Treasury understood the nature of this recovery. I believe that those comments underline the fear that the unemployment crisis which still faces so many of our communities will not be overcome.

The Government seem to have given up the fight against unemployment: the costs of unemployment built into the long-term expenditure programme seem to be on an even keel, which implies that the current unacceptable level will continue.

The Chancellor should have retained the present level of PSBR at least, if not slightly increased it to try to stimulate the economy. If we can sustain the low inflation rate that we have at present, with the current PSBR, it ought to be possible to live with it for a little longer. That situation should be facilitating capital expenditure in areas that include schools, universities and hospitals, yet the plans announced are to reduce capital expenditure from £29 billion to £20 billion by 1997. I would like to see capital expenditure programmes increased to encourage the construction industry, especially. It is ridiculous that we are willing to live with such levels of unemployment when those unemployed people could be used to build the capital assets that are greatly needed in so many parts of our communities.

I am concerned that there is not more money being invested in energy efficiency and conservation. I acknowledge that steps have been taken along that route, but a comprehensive programme is neeeded which will help all low-income households, pensioners, and disabled people to cut household bills, to reduce energy consumption, to protect the environment and to create jobs. That would have been a beneficial step involving an expenditure programme of between £1·5 billion and £2·5 billion.

Infrastructure work to the railway network in Wales is needed. The electrification of the north and south Wales line is needed as much as the announced expenditure on the west-coast line.

I am concerned at the effects of cuts on local government services. We know the effects of those cuts in England and I am worried that the same may happen in Wales. Page 118 of the Red Book shows that the level of public expenditure in Wales will remain static at £6·2 billion in real terms from 1994 to 1997. Given the demographic increases, which will lead to an increased demand for health services, I suspect that there will be an inevitable erosion of community care services. That is worrying. In addition, local government reorganisation will cost at least £150 million, which means that other services will suffer.

People may ask where the money would come from to pay for what I would like to see happen. The level of expenditure on weapons of war in the post cold war era is Unsustainable. Spending £23,000 million on armaments is well over the top. The United Kingdom spends more than 4 per cent. of GDP on defence, compared with 1·6 per cent. in Spain, 2 per cent. in Italy, and 2 per cent. in Canada. Of our European Union partners, only Greece spends more on armaments. Surely it is now time to look for cuts in that area.

As I represent a rural constituency, I have obvious foreboding about the effect of increases in the cost of petrol. Between now and the general election, I can envisage petrol at £3 a gallon, which would be devastating for rural areas, not only directly hitting people on low incomes who have no alternative transport, but pushing up other costs. The issue of urban traffic pollution should have been more comprehensively addressed by road taxation rather than hitting those who have no alternative, such as those in rural areas.

At my constituency surgery this weekend, a pensioner told me that, living by herself, she spends between £15 to £20 a week on warming her house. VAT at 17·5 per cent. will result in an increase of between £2·60 and £3·50 in her fuel bills. She will receive £1 extra from the Exchequer, which means she is between £1·50 and £2·50 worse off. That extra cost will hit many disabled and elderly people hard and the Government will pay a price for that.

The changes to unemployment benefit are also worrying to me, especially as I represent an area that has a seasonal economy. Awarding unemployment benefit to seasonal workers recently was seen as a step forward, but some of those claimants will now lose their benefit. I suspect that we shall see the Government tinkering with the unemployment statistics to play down the level of unemployment if we are to define them not only as people who are out of work, but those who draw unemployment benefit.

As for the vicious ending of invalidity benefit and what that may mean, the citizens advice bureaux have drawn our attention to the many severely disabled people having their invalidity benefit withdrawn because they are classified as being capable of holding jobs such as being an artist's model. A person may be able to sit reasonably still in a chair to perform that function, but how many jobs are there in any community for artists' models? Defining a severely disabled person as employable on the basis of being an artist's model is an ominous portent of what we shall face with the new system. Disabled persons' organisations will need to fight that issue forcefully.

The non-indexation of taxation could be insidious over the years. It will draw people on low incomes into the tax net. A single person earning £66 a week may not pay tax this year but may have a wage increase of £2 a week and suddenly have to do so—perhaps only at a rate of 40p per week, but nevertheless that person would be drawn into the tax net and all its accompanying bureaucracy. The Government are stupid not to index the threshold levels for income tax and they should reconsider that.

The Budget is strategically misguided and is especially hard on vulnerable people—disabled people, pensioners, unemployed people, students, low income families and the rural poor. I remember an old trade union friend telling me once that what is morally right can never be politically wrong. I believe that the Budget is morally and socially wrong. It can never be politically right. It is cynical in the extreme and the Government will pay the price.