It has often been remarked that by the last day of a Budget debate all has been said, yet the variety of points which have been raised by hon. Members on both sides of the Committee and by Ministers—points which they have selected for explanation and debate—show that four days is by no means too long to consider this long and complicated Budget. Only a few minutes ago my hon. Friend the Member for Worthing (Mr. Higgins) raised yet another point, which I have heard mentioned before by economists but not in this debate, concerning the productivity of the barber. I am grateful to him for his consideration for my welfare. Indeed, I know that there are still many hon. Members who wish to speak, and I have no doubt that they are already making the necessary adaptations to their speeches to fit them for the Second Reading debate on the Finance Bill.
The new Member for Roxburgh, Selkirk and Peebles (Mr. David Steel) made a maiden speech which, I think the whole Committee will agree, was as commendably lucid as it was commendably brief, in accordance with the advice which we were all given by Dr. King earlier in the day. The hon. Member concentrated on the advantages of differential regional taxation. He may well have the opportunity, at a later stage, of seeking to amend the Finance Bill to accord with the policy which he was advocating. I certainly hope that we will have the opportunity of listening to the hon. Gentleman on many occasions during the somewhat indeterminate time we expect him to remain in the House.
I hope that the Chancellor will not think it presumptuous of me if I too—as one who, for four successive years at the Treasury, saw the gradual buildup of Budget speeches—add my congratulations to the right hon. Gentleman on his presentation. One very distinguished gentleman who was listening to him last Tuesday observed that the sequence of his speech was not very logical. He may have been right, but if there was any truth in the criticism, I suspect that it was due to the determination of the right hon. Gentleman so to arrange what he had to say as to hold the attention of the Committee throughout his marathon performance. That he certainly achieved.
Before I turn to certain details of the Budget—its effect on the individual and on industry—there are one or two matters which I think must be cleared up. I do not know whether it stems from the guilt complex of right hon. Gentlemen opposite, but again and again in the debate Government spokesmen have sought to shirk responsibility for the swingeing increases in taxation which were announced on Tuesday.
We have had it from almost every speaker from the Government Front Bench. Of course, it is the same old line with which we have become familiar in almost every sphere. When our relations with E.F.T.A. went sour, the Europeans were told that it was all their fault because they did not understand what the British Government were trying to do. When mortgage interest rates reached an all-time high, it was said to be all the fault of the building societies, until the Chairman of the Co-operative Permanent Building Society told the right hon. Gentleman that he was talking nonsense, which he certainly was.
I am sorry, as I am sure we all are, that the First Secretary of State is forced to take a short rest. We all hope that he will soon be quite fit again. Because of the official explanation which has been given, I shall make no comment on the extraordinary answers which he gave in the television interview the other night, but the First Secretary was fully in command of himself when he spoke in the Budget debate on Wednesday. He bears, and I am sure that he would agree, a heavy responsibility for the trend of our economy, and he is still fulfilling his engagements. I am sure, therefore, that he would be the last person who would wish me to mollify my criticisms merely because he is in need of a rest after some six months of responsibility.
After four years as a Treasury Minister, I am sure of one thing. Whatever the circumstances, no Chancellor with whom I served would ever have so exaggerated our difficulties as to prejudice the £ for purely party political reasons. I echo the words of my right hon. Friend the Member for Birmingham, Handsworth (Sir E. Boyle) earlier this afternoon to the effect that it would be folly to devalue the £ and that devaluation is obviously not in prospect. It is incredible that the First Secretary and the Chief Secretary, even in speeches on this Budget, the primary purpose of which is to strengthen sterling, as the hon. Member for Lincoln (Mr. Taverne) observed, have continued to emphasise the overall balance of payments deficit without a single word about the special factors which caused it last year.
Why did the right hon. Gentleman, the First Secretary, who is responsible for our economy, not stress the fact that by far the larger part of the rise in imports was due to re-stocking, which my right hon. Friend the Member for Barnet (Mr. Maudling) had anticipated? Why did he not tell the Committee that the outflow of ordinary direct investment was already less last year? Why did he not mention the special non-recurring factors concerning oil investment? These are genuine considerations which in the national interest ought to have been stressed.
It may be that the First Secretary of State simply does not understand them. When he was interrupted the other day after my right hon. Friend the Member for Bexley (Mr. Heath) has spoken, the First Secretary of State told us that he proposed to hit back, and he likened himself to an elephant, which he described as a dangerous animal. The other characteristics of an elephant—and I quote from the highest authority—are that it has a disproportionately large head but a brain which is not unusually well developed.
In that speech the right hon. Gentleman—and he is responsible for the trend of our economy—dealt at great length with the cancellation of the TSR2 and with what might take its place. According to the First Secretary, this is an essential part of the Budget proposals. But it is a staggering fact that when the First Secretary sat down, having spoken on a Budget designed primarily to deal with the balance of payments, he had said not one single word about the dollar cost of that replacement. He told us that we had the option to buy the F111A from the United States, but it was Mr. McNamara, not the First Secretary, who told the world that if we exercise this option it will cost more than 1,000 million dollars. Is not that highly relevant to the balance of payments? Why was it the one factor, and by far the most important factor, in connection with the TSR2 and the Budget, which the First Secretary deliberately concealed from the Committee? I saw in this morning's Daily Telegraph that the air correspondent, who was in Washington last week, reports, that the nature of the option
I was told in Washington last week, is being 'kept particularly vague at the request of the British Government'".
I do not know; maybe this accounts for the strange silence of the First Secretary on this point. But perhaps again the most generous construction is that on yet another essential point the right hon. Gentleman simply did not know the answer. After all, hon. Members will remember that six weeks ago the First Secretary made a speech based on the assumption that the import surcharge had already been reduced when in fact it does not come down until the end of the month.
Last Wednesday my right hon. Friend the Member for Bexley asked a simple question which has still not been answered. I hope that tonight we shall have an answer from the Chancellor, otherwise the country will draw its own conclusion—and the obvious one at that.
In the White Paper of 26th October the new Government, as they said, in possession of the full facts of the situation, which they purported to give to the nation in the White Paper, specifically stated that there was
no undue pressure on resources calling for action.
That is quite clearly set out in the White Paper. But two-and-a-half weeks later we had an autumn Budget, introduced by this Chancellor of the Exchequer—an autumn Budget which he believed adequately dealt with the situation at that time.
Now we have this Budget, specifically designed to decrease the pressure on our resources by £250 million. Does the Chancellor seriously pretend that what has happened since 26th October—when he published the White Paper—which has led to this deplorable Budget is not the sole responsibility of the Labour Government? If he wishes to deny it I will willingly give way now. That must be the most revealing moment of silence. On top of the record increase in taxation, the lack of confidence which the Government have themselves created by their actions has resulted in ihe maintenance of a 7 per cent. Bank Rate for almost the longest period one can remember.
The Prime Minister, in those entertaining speeches with which he regaled us when he was in opposition, was fond of quoting from HANSARD. I will read only one quotation from HANSARD. The present Prime Minister, after expatiating on the harmful effects of a 7 per cent. Bank Rate and after pointing out that it adds tens of millions of pounds to our annual outgoings on invisible account through increased interest charges paid across the exchanges, went on to say this of a 7 per cent. Bank Rate:
Have we not learned by experience? Even the Chancellor … seemed to have been converted from this dangerous and debilitating over-reliance on the monetary weapon. Now he sinks again into the old groove."—[OFFICIAL REPORT, 26th July, 1961; Vol. 645, c. 445.]
The right hon. Gentleman has not merely sunk again into the old groove, but has found himself up the creek—and somebody, in a moment of disequilibrium, has lost the paddle.
Our main complaint about this Budget is that, while it seeks to deal in the short term with the crisis of confidence in sterling, it does absolutely nothing in the long term to make this country more competitive, to increase our productivity, to reduce industrial costs, to stimulate initiative and enterprise or to improve our export performance. If hon. Gentlemen opposite are still doubtful about whether my words are right, do they really think that British industry will be helped by an extra 6d. on Income Tax, an extra 6d. on petrol, a 50 per cent. increase in vehicle excise licences, the threat of a 40 per cent. Corporation Tax and a devaluation of investment allowances?
My hon. Friend the Member for Twickenham (Mr. Gresham Cooke), a member of the Wider Share Ownership Committee said this afternoon that he thought that what had taken place in this Budget would deter people from investing. Reference has been made to the speech on Thursday last of the hon. and learned Gentleman the Financial Secretary to the Treasury, who said on this point:
Even the reaction of the City of London appears to have been far more favourable than many hon. Members expected …
He went on, after giving details of share rises, to tell us:
The headline is:
'Index up 4·4 as share recovery goes on'".—[OFFICIAL REPORT, 8th April, 1965; Vol. 710. c. 797–8.]
I hope that the hon. and learned Gentleman has seen the headline tonight, for it states:
Share prices tumble—Index falls 7 points".
The explanation given tonight is this:
A wave of depression engulfed the Stock Market today".
It goes on:
Confidence was not helped by a weekend of detailed comment on the Budget".
The truth is that people are beginning to realise just what the Chancellor is up to. The particular form of Corporation Tax which he has chosen to introduce is bound to penalise overseas investment. Indeed, it is designed to do just that. What is important is that it is designed to do it indiscriminately, without any regard whatever for the enterprises concerned. Yet, time and again, direct overseas investment has made new openings for British contractors abroad, for the provision of innumerable technical
services and for the export of British manufacturers, particularly capital equipment, plant and machinery.
The latest balance of payments figures show a significant increase in invisible earnings, an increase of £47 million to £610 million. The fact is that overseas earnings from banking, insurance and shipping are frequently the direct consequence of overseas investment, which the Chancellor now seeks to curb. One may well ask where this country would be today but for the income from overseas investments. Last year the net increase from overseas interest, profits and dividends was up by £46 million to £435 million.
What the Chancellor is doing is not merely acting indiscriminately to cut future returns but also deliberately prejudicing the policy of aiding the poorer nations by trade rather than aid. It is no good his trying, as he did in an intervention the other day, to minimise the effect of this Corporation Tax on the poorer nations. While, of course, it is relevant to consider new investment in these countries, his tax would also have an effect on existing investment. It is the case that half of Britain's private overseas investment is in the developing countries.