When I said that the Government inherited both our problems and our solutions, I did not realise what a hash they would make of them.
The handling of the surcharge was inept beyond belief. The handling of the Bank Rate, the announcement of Capital Gains and Corporation Taxes, which did great harm to the movement of money across the exchanges and great harm to the capital side of our balance of payments, and the inflationary November Budget were clearly, as admitted by the Prime Minister in his speech of 23rd November, last year, the cause of the confidence crisis from which the Government have been trying to extricate themselves from then onwards.
The problem now obviously is to maintain the level of prices as competitively as possible and the main danger which has arisen in the last year of Labour Government has been the immense pressure on prices. We have seen a rise in the level of prices far higher than the economy can sustain if we intend to maintain our export trade. The source of this rise in prices is fairly clear to see. First, there is the increase in the level of taxation. Secondly, there is the increase in the level of incomes. In both cases it is clear that the policy of Ministers has made a major contribution to the increasing level of costs and, therefore, the increase in level of prices.
About 70 per cent. of the constituents of prices is added in this country. If the First Secretary wants to see why his own incomes policy has been driven through on so many occasions, he need look no further than his own colleagues. The level of prices has risen by about 5 per cent. over the last 12 months and the main contributor has been the Chancellor of the Exchequer himself with the taxes which he has imposed, taxes falling on the level of prices of things consumed in this country. The other main problem has been the level of incomes. We were asked about an incomes policy.