Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 8th April 1965.

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Photo of Mr Jock Bruce-Gardyne Mr Jock Bruce-Gardyne , South Angus 12:00 am, 8th April 1965

I should like, first, to join the hon. Member for Southall (Mr. Pargiter) in offering congratulations to my hon. Friend the Member for Leyton (Mr. Buxton) on his maiden speech. I am afraid that my congratulations, as a very new Member myself, are somewhat devalued. I can only tell him that what I lack in connoisseurship of maiden speeches I make up for with a very clear remembrance of my ordeal when I made my maiden speech. I am sure that we are all glad to have my hon. Friend here and that everybody on this side hopes that we shall hear from him many times again for many, many years in the future.

I should perhaps say that I have very few connections with Leyton. The nearest that I can think of is that I spent two or three years in Bulgaria, which, also, has a very high age group in its population. It is said there that the reason for their longevity is that they subsist on yoghourt and garlic. I do not know whether this is true also of Leyton.

I do not intend to follow the hon. Member for Southall, in his discussion of the problems facing local authorities in raising their finances, except in one point to which I shall come later. We all realise that the Chancellor has been trying to solve a delicate equation in this year's Budget. He had, on the one hand, to avoid exasperating those who had bailed him out overseas. On the other hand, he had to avoid provoking the wrath of his right hon. Friend the First Secretary, or upsetting the mission on which his right hon. Friend has embarked—the formulation of an incomes policy, about which we have heard so much from the right hon. Gentleman both today and yesterday. Finally, the Chancellor had to serve up the package in a form which was sufficiently palatable to his hon. Friends below the Gangway, who, we all know, have had a good deal of unpalatable stuff to take from their right hon. Friends in recent months.

It was the first part of the equation—the effort to re-establish the Government's credit abroad—that really mattered. The rest—Corporation Tax, Capital Gains Tax, the abolition of business entertaining and of initial allowances for business cars —were so many burnt offerings on the altar of the First Secretary's illusions. These burnt offerings have many undesirable features, some of which have been pointed out by my right hon. and hon. Friends and to one of which I should like to return in due course. But the most undesirable feature is that those burnt offerings are quite simply irrelevant where, indeed, they do not positively cut across the task of producing a more efficient and competitive economy. Hon. Members opposite call these measures—the Corporation Tax and the Capital Gains Tax—social justice. Some of our international creditors have rather cruder language for them. They call them manifestations of the "English sickness", of which the most obvious symptom is an inability to recognise the disease from which one is suffering.

The Chancellor has also decided to restrict home demand by about £165 million worth of new taxation. I do not dispute that the Government were bound to take this amount of money out of the economy, given the situation in which they found themselves. They should, perhaps, have gone further. The hon. Member for Colne Valley (Mr. Duffy) yesterday accused my right hon. Friend the Member for Flint, West (Mr. Birch) of stressing irrelevancies when he called for the reimposition of National Health Service prescription charges. Of course, chat is not the sort of matter that makes he difference between solvency and insolvency for the country, but the removal of the charges is precisely the sort of method which strikes our creditors and those who helped right hon. Members opposite in November as being totally irrelevant to the solution of the problems facing the country and a sign, indeed, of our unwillingness to get down to facing those problems. The Chancellor would have done well to heed the advice of the Governor of the Bank of England and to make a more serious attempt to cut back the growth of Government expenditure.

Hon. Members opposite, however, have continued to reiterate that this is not a situation of their creation. We have heard a great deal about this during the debate and I do not want to retread a lot of well-trodden ground. I feel, however, that we still have not had the right explanation of what happened last autumn. I am inclined to agree that the Chancellor of the Exchequer did not create this situation and that he inherited it. He inherited it, of course, from his right hon. Friend the First Secretary, who charged in from the very moment of the election with his well-known exuberance and determination to devise an incomes policy which was to be the solution of all our difficulties.

To obtain the signature of the Trades Union Congress to the First Secretary's Statement of Intent, all sorts of good things had to be promised. Those good things were bound to be inflationary. Therefore, to safeguard the balance of payments against the threat that this inflation would create, the First Secretary had to persuade his colleagues to rush the imposition of the surcharge. To the astonishment of right hon. Members opposite, our friends overseas reacted violently to this flagrant breach of our international obligations.

To pacify our friends overseas, the President of the Board of Trade had to be rushed off to Geneva to assure them that the £ was on the verge of collapse and that that was the only method of saving it. The extraordinary thing—extraordinary only to the right hon. Gentleman—was that he was believed. Indeed, the very crisis that the First Secretary was complaining about as being upon us was produced.

However, the First Secretary, nothing deterred, ploughed on. The hapless Chancellor was required to give advance warning of the Corporation Tax and the Capital Gains Tax in precisely the form which was calculated to create the maximum possible loss of confidence in sterling at home and abroad. And so the central bankers had to come to our rescue. We are now paying the price of the First Secretary's folly. This price has got to be paid. In this instance at least, hon. Members opposite can legitimately claim that they now have no choice but to break their election promises.

The Chancellor has told us—the First Secretary repeated it yesterday and the President of the Board of Trade has referred to this—that right hon. and hon. Members opposite regard the Budget as an instrument of national and regional planning. I should like to say a brief word about this subject of regional planning. I suggest that in this Budget we have seen hardly a glimmer of a sign of the Budget being used as an instrument of regional planning. There is, it is true, a small gesture towards local authorities by giving them increased access to the Public Works Loan Board.

This is welcome so far as it goes, but it is by no means clear what the scope of this modest concession will be. It remains to be seen whether it will be confined to development districts or whether, as I hope, it will be extended to the whole of Scotland, for example. I very much hope that right hon. Members opposite will not take the advice of their hon. Friend the Member for Southall and extend this concession to all local authorities, because in that event it would cease to be in any sense an instrument of regional planning.

We badly need assistance of that sort in Scotland where, as the President of the Board of Trade this afternoon reminded us, the level of unemployment is still 3·3 per cent. or rather higher than the rate which was regarded as necessitating an urgent injection of fresh demand when it applied to the country as a whole two years ago. Of course, the right hon. Gentleman pointed out this afternoon that there has been a marked and continuing decline in unemployment in Scotland and I am glad to see this. He seemed to take credit for it but it all follows of course from the policies that were so effectively introduced and carried through by my right hon. Friends when this party was in power. We should remember this. It was a remarkable achievement to absorb a loss of 70,000 jobs in the Scottish economy in three major traditional industries and, indeed, to absorb additional employment on top of that. These are merely the foundations on which the present Government are carrying on.

Far from doing anything to stimulate expansion in Scotland, however, the Chancellor has continued to impose and even to extend a series of measures which bear particularly hardly on enterprises operating in areas which are at some distance from their markets, like those of Scotland. We continue to suffer from the 7 per cent. Bank Rate and from the increase of 6d. in the duty on petrol. Now, on top of that, we have the doubling of the cost of commercial vehicle licences. That, again, is a particularly harsh blow to firms and businesses in Scotland.

There is one aspect of this increase in the vehicle licence fee which interests me. The right hon. Gentleman decided to take £48 million in the form of new taxation on motor vehicles of all sorts, but the bulk of that new taxation went on commercial vehicles, thereby increasing firms' costs, particularly the costs of firms operating at some distance from their markets, and putting firms in Scotland at a particular competitive dis- advantage compared with firms near their markets.

The right hon. Gentleman preferred to put the bulk of the increase in taxation on commercial vehicles, for the simple reason, I suggest, that the drivers of commercial vehicles are not likely to be influenced in their voting habits by the degree of tax which their vehicles have to pay. The right hon. Gentleman hesitated to put a big increase of taxation on motor cars, for the simple reason that the owners of cars have a substantial voting voice.

During the debate hon. Gentlemen opposite have invited us to suggest the changes of taxation that we would introduce. I should like to see the Chancellor switch the emphasis in this taxation from commercial vehicles to private motor cars. That would be fair to the country as a whole, and would not impose further burdens on industry in Scotland.